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Brokers gear up for greater transparency

At a glance

  • Insurance Mediation Directive promises big shake-up of industry
  • Commission disclosure may be introduced for first time
  • Brokers open to any new transparency regime

Proposals from Brussels, in the shape of the revised Insurance Mediation Directive, have raised the issue of commission disclosure for insurance brokers, and many in the industry see the move as inevitable.

“Anything that allows us to sit in front of the client and justify what we do for them in return for what they pay for a broker’s services is a good thing,” said Ian Stutz, managing director of Brokerbility, a broker network that looks after 36 higher-end independent brokers.

The lesson, if there is one, is clearly making sure that when you sit in front of the client you fully explain what a broker does on a 12-month cycle for a client

Ian Stutz, Managing Director, Brokerbility

Ian, who says the revised Insurance Mediation Directive may not actually be in place until 2019 or 2020, believes that the new rules will, in the long run, help brokers.

“There is a danger when you turn up at a client and you present them with a set of terms with an insurance product that is right for them, the client doesn’t always know the work that has gone in to doing that,” he said..

“And very often that can be a source of frustration for a client that says, ‘Well what do you do for the money?’ The lesson, if there is one, is clearly making sure that when you sit in front of the client you fully explain what a broker does on a 12-month cycle for a client.”

Impact of new regime

It is expected that the more professional brokers will have little to fear from any new regime.

“The only impact will be where those brokers who are unable to outline their service proposition may well find that the money they earn from a client may well be chipped away by that client as what you do doesn’t equate to what you are charging,” said Ian. “Those who aren’t providing a particularly good or full service will struggle under a disclosed regime.”

Zurich is fully aware of how the broker wants to present its set of terms and are prepared to be flexible

Ian Stutz, Managing Director, Brokerbility

Other brokers, though, see the potential Brussels directive as adding yet more costs, especially at a time of squeezed margins.

“It is going to be more administration that isn’t required,” said an owner of a niche brokerage based near London. “You would have to make sure that all of your commissions are set up correctly within your systems, which is going to be a challenge.”

Tackling customer conversations

In the future, brokers may face some awkward conversations with their customers about commissions or, increasingly, use of a fee-based model but an insurer like Zurich will be able to guide brokers through this process.

“Zurich is fully aware of how the broker wants to present its set of terms and are prepared to be flexible,” added Ian at Brokerbility. “If the broker is going on a fee basis they will provide a net premium, and if a broker wants to still maintain a commission basis then a discussion takes place on that.

“Equally, Zurich is very helpful in the background. This is not so much about what the broker’s fees are, but that Zurich has always been very helpful to brokers in explaining how premiums are made up. This helps in justifying the overall cost of insurance.”

Image © Getty

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