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Steadfast’s Kelly commits to commissions fight

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Steadfast CEO Robert Kelly will remain at the company’s helm until the end of 2022 as the broking industry gets ready to put its commissions payment case to a review sparked by the Hayne royal commission.

“Our job is to point out the history of insurance broking, the ramifications that losing commissions may have for the consumer and the rationale for maintaining the current commission structure, and to prove that to Treasury,” Mr Kelly told today shortly after announcing a 19.8% rise in Steadfast’s first-half net profit to $40.5 million.

“Of the issues that were raised during the royal commission, none of them related to insurance broking.”

Mr Kelly said in 2016 that he would continue as CEO until at least the end of 2020. Today’s announcement of an extension to 2022 takes his tenure through to the conclusion date for the proposed inquiry into financial advice and broker commissions.

Commissioner Hayne’s final report recommends that a review in three years should include whether the exemption of general insurance from a ban on conflicted remuneration remains justified. The review would “preferably” be completed by June 30 2022 “but no later” than December 31 2022.

Mr Kelly says abandoning commission arrangements would be out of step with common practices around the world, but he welcomes other insurance-related recommendations from the royal commission.

“All in all, the royal commission is pointing the insurance industry in the right direction,” he said.

Steadfast’s first-half revenues increased 21% to $263 million as the broker network and authorised representative business benefitted from rising premiums and increased volumes.

Mr Kelly says the hardening market still has some years to run, with the Sydney hailstorm and Townsville floods likely to contribute to the momentum.

Total industry claims from the hailstorms are likely to be well over $1 billion, he says, while the level of Townsville losses is continuing to rise and could be substantially more than present estimates in the $600-$800 million range.

“What it does is reaffirm that this hardening market, which we took quite a few years to get into and which is really in its embryonic stages, will continue,” he said.

Steadfast Direct has already handled more than 100 claims from Townsville, without issues, after taking steps to avoid a repeat of problems experienced following the 2011 Brisbane floods, Mr Kelly says.

“We put in place advice to the brokers about how the consumer should approach the issue and we diligently set policies,” he said.

Gross written premium (GWP) from Steadfast Network and equity brokers rose 12% to $2.9 billion in the first half while underwriting agencies GWP jumped 24% to $558 million

Eleven brokers joined the network during the period, taking the total to 388. Organic growth was supported by revenues from business pack, industrial special risks, professional risks, motor lines and liability.

Mr Kelly says the company remains on tracked to meet the increased earnings guidance issued in October after a strong first quarter.