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IAG initiative: brokers divided over their role

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Brokers are divided over IAG’s decision to defer premium payments for up to six months for small businesses experiencing financial hardship in the coronavirus crisis.

Senior brokers have contacted insuranceNEWS.com.au to voice either opposition or approval to the IAG initiative, which is expected to be followed by other insurers within the next few days.

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Yesterday insuranceNEWS.com.au reported National Insurance Brokers Association (NIBA) CEO Dallas Booth saying the initiative may impact on his members’ ability to stay in business.

“It is critical that ways are found to maintain the viability of insurance brokers so that they can continue to support, advise and assist their clients in the coming months,” he said.

insuranceNEWS.com.au has been contacted by senior brokers expressing a variety of views on the issue. Some say brokers must be paid for their ongoing range of services to their clients, while others say their focus must be on ensuring clients survive the crisis, and calling on brokers to “stand with the insurers”.

An IAG spokesman told insuranceNEWS.com.au today that the group’s priority is “to provide meaningful relief for our vulnerable customers as soon as possible, which is what we’ve done. The response to our measures has been overwhelmingly positive.

“We want to help our customers stay insured, stay protected and support them through these incredibly difficult times.”

On March 23 NIBA President Eric Harris urged insurers and premium funders to “support our communities” to ensure SMEs survive the coronavirus crisis.

“Banks have already announced measures they are taking, how can the insurance industry help?” he said in a LinkedIn post.

Mr Harris told insuranceNEWS.com.au the issue is about “making sure businesses survive. We are all pretty screwed if there are no small businesses at the end of this.”

Today major authorised representative group Insurance Advisernet entered the debate, with MD Shaun Standfield expressing “disappointment” at Mr Booth’s comments.

“In this time of great uncertainty for all businesses and in turn their owners and employees, I believe the measures announced by IAG are well-intentioned and the team at Insurance Advisernet applaud the position they have taken,” Mr Standfield said.

“Brokers have a duty to put client interests first before their own, and this hardship measure allows brokers who have clients in a position of hardship to offer them ongoing insurance coverage.

“The last thing we wish to see happen over the next six months is for small businesses to be hit with not only dealing with COVID-19 but also having an impact from an insurable event.

“I believe the comments [by NIBA] are selfish. The majority of brokers have a diverse portfolio which fortunately will see them through this COVID-19 event – yes, with less income, but they will have a business.

“Whereas many SME’s… will have nothing to return to without hardship measures such as those announced by IAG. This hardship provision is not mandatory but allows professional brokers to offer this as a means to assisting their clients in getting through the pandemic.”

Mr Standfield says brokers “need to reassess our own needs against those of our clients during this time”.

“Our goals can remain the same, but the time horizons have shifted to reach those goals. I look at this event as an opportunity to demonstrate to our clients not only our expertise in insurance, but our opportunity to put client interests first.

“Surely we remember that clear message from the royal commission.”

Mr Standfield’s unequivocal statement comes as insurers prepare to announce within the next few days a range of measures to help clients through the crisis. insuranceNEWS.com.au understands these measures will be similar to IAG’s.

A senior executive from another large insurer told insuranceNEWS.com.au today that Mr Booth’s comments on behalf of NIBA “showed self-interest and negativity. This is an opportunity for brokers to play a more active leadership role rather than just wait for insurers to do something.”

The executive – one of several to contact insuranceNEWS.com.au today – says that after a spate of natural catastrophes in the past six months insurers have many financial and logistical issues to deal with, but this has not stopped them from focusing on the welfare of their customers.

“Ultimately the SME businesses we’re trying to help in this instance are brokers’ clients,” he said. “All I am saying is that brokers need to stand with us in identifying clients who are experiencing difficulties and helping them to make use of measures that will get them through a difficult period. That’s what they signed up to do when they became brokers.

“They will get their commission, but it will be deferred. They won’t get paid their commission for 180 days instead of 90. Compare that with the alternatives: the business becomes underinsured or even not insured at all, or it goes to the direct market or it simply fails.

“A business that survives, that sees its broker as a true support, provides the broker with another five to 10 years of commission stream.”

Another insurance executive says the issue is “simple enough. Insurers have a vested interest in seeing SMEs survive and thrive. It’s in all our interests to help them through a difficult patch like this.

“This is an opportunity to demonstrate their value, their expertise and their commitment to the client.

“Those comments yesterday sounded like brokers believe they’re entitled. Right now they’re not covering themselves in glory.”

A senior broker told insuranceNEWS.com.au the IAG initiative is “at last something to help our business clients to hang on”.

“It would be nice to see some equal flexibility coming from the [premium] funders,” he said.

“We should remember this is only about a deferral. We’ve got to be seen doing something as a group, and sacrificing something to help our clients.”