National Insurance Brokers Association (NIBA) CEO Phil Kewin says he’s contacted CGU after the insurer announced it would wipe out commissions on crop cover – and been assured the tactic won’t be replicated in other lines. 

As insuranceNEWS.com.au has reported, CGU will cut commission on crop from 20% to zero from July 1, sparking a backlash from some rural brokers. 

“I have reached out to some members to get some feedback and I have also reached out to CGU just to understand,” Mr Kewin told insuranceNEWS.com.au. 

“The sense I get is that while it doesn’t impact a lot of brokers, those it does impact, it could have quite an impact. It’s their livelihood and I can understand the challenge that this is presenting some brokers. 

“CGU has assured me that this is not anything other than a one-off necessity in this particular market where there is limited capacity and it has been hard to make any profit for a number of years.” 

He says CGU has always been supportive of brokers. 

“Everything they’ve done, in my experience, has indicated their support for brokers, commissions and the intermediated market.” 

But while he says he understands “the rationale” for the move, brokers are concerned by the “short timeframe to deal with this”. 

“Brokers would have liked to have sat down at the table with CGU and said ‘ok, what’s the problem and how can we be part of the solution?’ 

“Nobody wants to see capacity removed from the market but it’s going to be difficult for brokers to have a conversation [with a client] which could be along the lines of ‘the premium’s higher, and we need to charge a fee on top.’ 

“And this is not the type of product that generally brokers charge a fee for.” 

Rural brokers have been contacting insuranceNEWS.com.au since the change was announced to express their concerns. 

Several have raised the fact that agents for WFI, which is also owned by IAG, will retain commissions for crop, while others point out that CGU is also exiting livestock cover. 

“CGU has now dealt another blow to regional Australia with the withdrawal of the livestock insurance product,” one broker said. 

“Livestock insurance is a smaller more niche product that certain brokers like ourselves do rely on having access to, for livestock agency groups and farming customers.” 

IAG told insuranceNEWS.com.au the number of brokers and clients accessing the livestock cover is so small that it makes sense to shut it down. It says the WFI distribution model is different and not a direct comparison. 

On the crop decision, the insurer says it was a “necessary step” to make sure it could continue to offer much-needed capacity.