Steadfast Group Chairman Robert Kelly says any ban on broker commissions by the Federal Government could compromise consumer choice.

Speaking at an Australian and New Zealand Institute of Insurance and Finance (ANZIIF) executive breakfast in Melbourne last week, Mr Kelly said the Government’s decision to examine risk insurance commissions is an “emotional decision” by the Government and a forced move to a fee-for-service model could seriously damage the market for small and medium-sized enterprises.

He says if commissions were removed the cost of upfront fees for advice could significantly reduce the number of people and small businesses able to access advice.

“In the SME market you may find that if commission is taken away and a fee is introduced then choice will go out of the model dramatically,” he said.

Mr Kelly warned that small businesses would have to decide if they could afford to pay for advice. “If they want to get that advice from several sources they may have to pay an advice fee to several players.”

“The entrenched way that insurance is done in SMEs all around the world has seemed so far to be successful based on a commission basis.”

Willis Australasia CEO Bill Donovan says his company’s campaign against contingent commissions or over-riders – payments to brokers for steering business to a specific insurer – reflects the importance of “perception of value”.

“If you act as an advocate (for a client), how can you then on the other hand take a profit share… from a carrier?

“If the client has a major claim, are you actually acting totally honestly in endeavouring to get the very best outcome for that client if it is going to impact on the profitability of your business from contingent commissions?”