Rejecting the cheapest quote for income protection cover cost the builder of Victoria’s desalination plant millions of dollars, the Royal Commission into Trade Union Governance and Corruption has heard.

On Friday the commission heard the Electrical Trades Union (ETU) and the Construction, Forestry, Mining and Energy Union were dominant players in negotiating the enterprise bargaining agreement (EBA) with Thiess, which would pay the insurance premiums.

The unions wanted cover with the Incolink income protection and trauma scheme, starting at $43 a week per employee, but Thiess obtained a quote from Aon through Lloyd’s for the same cover at $20 a week per employee less.

Incolink came down to $33 and Thiess, pressed for time, agreed – despite it costing about 40% more than Aon’s offering.

Most of Friday’s hearing was spent discussing income protection cover the ETU’s Victorian branch arranged through underwriting agency ATC Insurance Solutions as part of an EBA with the National Electrical and Communications Association (NECA), the employer industry body.

The commission heard about 20% of the premium paid by employers went to the ETU.

Former ETU state secretary Dean Mighell also received payments from ATC.

Counsel assisting the commission, Jeremy Stoljar SC, told the hearing employers had to pay or buy services from entities associated with the ETU or other unions.

These included the ETU-nominated income protection insurance policy and scheme.

“Do these arrangements inappropriately and unnecessarily inflate employers’ costs and hence project costs?” he said. “Is there adequate disclosure to employers and employees of these arrangements and the quantum of revenue received by NECA and the ETU?”

The EBA does not disclose that the ETU has separately agreed an exclusive deal with ATC on the insurance, which earns ATC $14.8 million a year in premiums.

Mr Stoljar says the scheme pays $3.6 million to the ETU, described as a commission or a management fee.

ATC CEO Christopher Anderson agreed that about 20% of the premiums paid by employers went to the ETU.

ATC also signed an independent contractor’s agreement with Mr Mighell last year, to pay him $100,000 upfront and $15,000 a month to provide advice and expertise on income protection for unions. It ended the agreement this year and Mr Mighell invoiced the company two weeks later for a $165,000 bonus payment.

Mr Anderson told the commission management fees are a common arrangement among unions and ATC has one with the Maritime Union.

Mr Mighell says commissions and fees were disclosed and went into member benefits.

Employers could find out the numbers if they wanted.

When questioned on the accounts he replied he was a “humble sparkie” who relied on auditors.

He says the ETU set up an income protection scheme after seeing members become ill and lose their jobs, and it should get a commission for its work. It learned enough about the cover to not require a broker and was involved when ATC negotiated the policy with Lloyd’s.