Many corporate clients believe that once they have negotiated and approved a broker fee, they know exactly what their insurance broker is earning.

That is not always the case.

Risk Advisory Services has reviewed corporate insurance programs where businesses believed they had a transparent, fee-only arrangement, only to discover that additional commission was still being earned through the insurance premium. In one case, more than $10 million of annual insurance spend was being paid through commissions despite written confirmation that the brokers were not earning commission.

The issue is particularly relevant as broker remuneration disclosure is debated across the Australian insurance industry. With the National Insurance Brokers Association (NIBA) putting its draft Code of Practice out for industry consultation, critics are rightly asking why brokers wouldn’t fully support transparency regarding their remuneration. While much of that discussion has focused on small businesses, corporate clients may have far more at stake given the scale of their insurance programs.

Key considerations for corporate insurance buyers include:

• a broker fee does not automatically mean the premium is net of commission
• broker agreements may permit additional remuneration through related entities or other arrangements
• undisclosed remuneration can make it harder to understand the commercial interests connected with the advice being received
• even a small percentage of a major insurance program can amount to significant additional remuneration over time.

The issue is not whether brokers should be paid fairly. It is whether clients know how much is being earned from their insurance program, who is receiving it and where that money comes from.

If the answer is unclear, it may be time to look more closely

For a free, no-obligation chat about how we can help solve any Insurance and/or Risk Management problem your organisation needs help with, simply reach out to us today.