Fee transparency is a key issue for brokers in Australia. The current Insurance Brokers Code of Practice requires brokers to disclose their commissions only to certain retail clients.

Many brokers – including Oscar Shub, CEO of the Insurance Brokers Code Compliance Committee (IBCCC) – would like to see more transparency on fees.

The IBCCC wants the Code to require brokers to disclose commissions to all individual and small business clients, regardless of whether the client is a retail or wholesale client.

New Zealand Fee Disclosure Obligations

What is the situation for brokers in New Zealand?

IB asked local brokers how they approach fee disclosure and transparency obligations.

Charlotte Deane (pictured above) said that from her perspective as an insurance broker, under industry regulations that apply to brokers, disclosing fees to clients, including retail clients, is not an option but a requirement.

“Yes, we must disclose all fees,” she said.

Deane works at Sherpa Insurance Brokers & Advocates in Christchurch. She said they also have to disclose any commission the insurer makes to the client.

“We operate on the principle that we have no problem letting clients know how much we make because they see the value in our services,” she said. “I think that’s great, although some brokers make it very difficult to find out the fees by hiding them in the fine print.”

Mikaela Watts (pictured below), senior broker at Business Insurance Limited, said her firm also discloses all fees to clients.

She added that full transparency in dealings with customers and clearly stating any fees is “standard procedure.”

“I feel comfortable disclosing everything,” said the Auckland-based broker. She said full disclosure includes any commissions from insurers.

“We were never asked questions about how much we were making from the insurer or what fees we were charging on top of that,” she said.

Fee Disclosure: ‘Great for Customers’

At the recent New Zealand Underwriting Agencies Council (NZUAC) Expo in Auckland, IB suggested to Travis Atkinson (pictured below) that fee disclosure, particularly in the area of ​​underwriter commissions, could be a hot topic in Australia. How does this issue play out in the local industry?

He added that since new government regulations requiring brokers to be more transparent about fees came into effect a few years ago, “clients have had a great experience.”

“We got ahead of Australia on the regulatory front, we introduced full disclosure straight away, excluding some wholesale customers,” Atkinson said.

However, he added that excluded wholesale clients “are already one step ahead of the competition” and know how much their broker charges.

Atkinson said disclosing full fees to retail customers did not result in any loss of business.

“We can say that this has not caused any loss of customers or concerns about the level of profits compared to other margins and other types of businesses,” he said.

Atkinson said there was no doubt that brokers in New Zealand now disclose commissions and profits.

“Insurance brokers work really hard to give the right advice,” he said. “If a customer knows the fee, knows the commission, knows the broker and is prepared to pay it, then they are paying for the advice – so we have had to act to be more transparent.”

However, in New Zealand, as in Australia, industry views on transparency may vary, he added.

“There are always different views, but earnings transparency is ultimately about giving the client confidence that this is how much their brokers are earning,” Atkinson said.

More transparency – not just brokerage fees

Australian brokers IB has worked with are in favour of greater fee transparency.

Lisa Carter, CEO of Brisbane-based Clear Insurance, said she fully supports full fee transparency.

“I would like to see broker compensation fully transparent across the brokerage industry, for all clients and across all insurance products,” Carter said.

David Summers, managing director of Ausure Insurance Newcastle, said he felt that all elements of the insurance premium needed more clarity. Summers’ company is an Authorised Representative (AR) in the Ausure network.

“Transparency should extend to the entire insurance product,” he said. “Almost half of the cost of insurance comes from government fees.”

More information coming soon from IBANZ?

IB has contacted the Insurance Brokers Association of New Zealand (IBANZ) for more details on the fee transparency regulations.

How do you approach disclosing fees to clients and what changes would you like to see in transparency obligations? Please tell us below.