With a review of broker commissions looming, the National Insurance Brokers Association (NIBA) wanted hard evidence of the service that intermediaries provide.
So it commissioned Deloitte Access Economics to produce a report on broker value – and the much-anticipated study was published last week.
NIBA says it is delighted with the comprehensive 66-page report, which is intended to provide a foundation for brokers to go into battle against those pushing for a ban on commissions.
The report – which consulted brokers, insurers and SMEs – shows that broker value goes way beyond the client. So why change a system that works for everyone?
Or as NIBA CEO Dallas Booth put it to insuranceNEWS.com.au: “Where is the detriment that they are trying to remedy?”
In 2018/19, insurance broking contributed nearly $2.6 billion in gross value-added to the Australian economy, and directly employed 15,000 full-time equivalent workers.
“As a point of reference, these direct economic contributions are roughly equivalent to the economic activity in each of the gas supply, and creative arts industries in Australia,” Mr Booth said.
“The industry also indirectly supports economic activity in other businesses, worth almost $900 million in 2018/19, supporting over 5000 extra jobs.”
Following are some highlights from the report:
Value to the client
Some 40% of clients are underinsured or not insured at all before engaging a broker, the report finds – proving that brokers perform a key function in tackling underinsurance and closing the protection gap.
Intermediaries also play a vital role in helping clients understand and manage risk, with brokers identifying that 62% of their clients had limited understanding of their risks.
Brokers also promote choice and competition, with the average NIBA broker offering products across more than 10 different insurers.
The report finds that brokers save each client an average of 11 hours, equating to more than $230 million in time savings for business customers.
And claims support is crucial. Brokers save each client an average of two-and-a-half hours in the claims process. More than 40% of SME clients agree that claims would otherwise have been “much harder” to process.
Value to insurers
Brokers provide a valuable service to insurers, as well as clients, the report shows.
There is a huge time saving for insurers thanks to the efforts of intermediaries, equating to 1380 fulltime staff each year.
Brokers also help insurers expand their reach, with 38% of broker premiums written for clients outside Australia’s capital cities.
Some 13% of a broker’s policies sold represent new market opportunities, promoting innovation, with cyber risk commonly identified.
Value to the economy
Brokerage businesses employed 15,000 full time equivalent workers, and contributed $2.6 billion directly to the Australian economy in 2018/19.
The report says brokers enable market efficiency by reducing uncertainties for insurers and closing information gaps – thereby allowing for more appropriate pricing and product matching, and encouraging greater competition.
They contribute to economic stability through enabling better risk management, providing broader risk advice, better product-matching and faster claims receipts.
Value to government and broader society
Brokers provide disaster relief, advocacy and policy advice by supporting clients with claims preparation, assessment, lodgement and negotiation processes, the report says
They also help obtain insurance for difficult-to-insure clients – a critical service in the current hard market.
And brokers support their local communities. Surveyed brokerage businesses donated more than $25,000 each year to charitable and other social causes, and volunteered on average more than 550 staff hours to charities and other organisations.
Click here to read the full report.
