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Broker value 'goes way beyond client': key report

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The immense value of insurance broking to clients, insurers, the economy and society has been demonstrated by a new report prepared by Deloitte Access Economics for the National Insurance Brokers Association (NIBA).

The 66-page report, which is unprecedented in its scope and level of detail, was commissioned in the light of an upcoming review of general insurance broker remuneration, as recommended by the Hayne royal commission.

NIBA CEO Dallas Booth told today that the report will act as a “strong foundation” when the review comes around.

“We have something clearly on the record. This important report confirms the value of brokers to clients, but also demonstrates that broker value goes well beyond that.”

The report’s key findings include:

- In 2018/19, insurance broking contributed nearly $2.6 billion in gross value added to the Australian economy, and directly employed 15,000 full-time equivalent workers.

- Brokers encourage greater competition in insurance, with the average NIBA broker offering products across 10 different insurers.

- Broking reduces underinsurance, with 45% of new clients being underinsured prior to engaging a broker.

- Brokers save each client an average of 11 hours, which equates to more than $230 million in time savings for business customers.

- Brokers save each insurer an average of 3.3 hours, which equates to 1,380 full time staff each year.

- Brokers enhance distribution and client reach with 38% of broker premiums written for clients outside Australia's capital cities.

- Brokers support product innovation: 13% of a broker’s policies sold represent new market opportunities (on average).

Mr Booth says NIBA will “contribute significantly” to the debate over commissions when it begins.

He says those that call for the abolition of broker commissions haven’t necessarily thought about what happens next, or the impact that any change could have.

“Where is the detriment that they are trying to remedy?”

Mr Booth says commissions enable brokers to provide advice, placement services, and claims support to all clients regardless of complexity. But if clients had to pay a fee for complex claims support “most probably couldn’t afford it”.

Author of the report and Partner at Deloitte Access Economics John O'Mahony says insurance broking is not a simple transactional service.

“It is a relationship-based business that involves up to 10 pre-sales and post-sales services and creates many sources of value,” he said.

"We analysed information provided by 421 individual brokers, 78 brokerage businesses, and the six largest insurance broking businesses.

“We consulted senior staff at three insurance companies, two small business clients and representatives from the LMI Group, to help understand the stories behind the statistics.

“All up, we consulted almost 100 different articles, reports and data sources about the sector.”

Click here to read the full report.