Here at My Business 24/7, we’re interested in knowing if you cop the double wammy of commissions and risk management fees charged by your insurance broker. As you might have guessed, these costs simply add to the price of insurance, along with all those government nasties such as stamp duty, fire services levies and so on.

With the recent changes in the financial planning industry to move away from commissions we’re already starting to see insurance brokers getting all jittery – because they can probably see what’s coming. So we’re interested to know if you see value in a fee-for –service only model.

Of course, there are brokers out there that will do their homework for every client and ensure that they get the best cover at the best price – and generally, these are the niche specialists such as Audit Cover, Envirosure or XYZ, that focus on specific industries, their names say it all.  So if that’s you, then you should count yourself lucky that these guys have a soft spot for your industry.

For most small businesses in Australia however, what they are offered is ultimately dependent upon what their buying group has negotiated with insurers, which in turn, is essentially the same as what other buying groups have also negotiated with their insurers – often in exchange for higher commissions and therefore more expensive products in the long-run. If my local barista is using imported Italian milk to make my coffee, chances are that I will be paying for it along with every other sucker. Insurance is no different – if my costs are high and my ratio of claims to premium is high, then so to will my pricing be unless of course I go bust.

So its amazing that brokers justify commissions as compensating for ‘back-office’ administration costs when the reality is that many brokers connect straight through to quotation platforms whereby your risk details are uploaded into the broker’s system, automatically assessed by multiple insurance company systems, which return numerous quote options. The broker then selects the best terms and conditions – usually price and commissions, and sends you the invoice. Some ‘smarter’ brokers have also managed to automate that part too!

Now, where not saying that there’s anything wrong with efficiency or in achieving the best price. The problem we have is that you don’t get to see the cost savings from such efficiency gains! Indeed, what makes the broker’s job even easier is that most insurers will quickly replicate any changes in policy terms and conditions in order to match their competitors and not upset the ‘all powerful’ buying groups, such as NIBA, AIMS or Austbrokers.

Yes, Australian businesses are amongst the most well protected buyers in the world, and yes, most brokers are highly transparent with their remuneration and yes, complaints against brokers are few and far between, but do you really have a choice anyway but to use a broker, and would you actually use one if you didn’t have to??? After all, it assumes that they will know your business and its risks better than you do….

You can get insurance any time of year – sometimes even on weekends, depending on the type of insurance that you are after! Of course, it helps if you know what type of insurance you need.

Assuming that you know what type or types of insurance you need for your business, there’s a handful of ways to get insurance:

1. Through an insurance broker
2. Directly with an insurance company
3. Through a bank
4. Online

For business or ‘commercial’ insurance, getting insurance through a broker is perhaps the most widely used. This is because they can advise you of what type of insurance to get and when to get it, and because its their business to be able to access a wide variety of options. Although, as we have previously reported variety may just come in the form of a different logo or corporate identity. So you should ask your broker to explain clearly what the differences are between different products.

It so happens that by law an insurance broker cannot advise you to purchase an insurance product if it does not cover your needs. In addition, a broker can help ease the burden of dealing directly with a large insurance company if you do have a claim – particularly if the insurance company intends to deny your claim!

Getting insurance directly with an insurance company or through a bank is generally the same process – speak to a ‘sales representative’ in their call centre, let them walk you through the cover and in some instances even get some (relatively) impartial advice. Of course, going direct means that you potentially save the 10% -15% commission that the insurer will pay the broker.

Getting a business insurance quote online is relatively difficult, as insurance companies in Australia simply do not provide many options. In most instances, online quotes are provided by insurance brokers or other distributors acting as agents of the insurance company. For example, Newsagents can be covered through a broker in Queensland who distributes business insurance on his website on behalf of an insurance company. In this instance, the broker still receives commission without the obligatory advice. So in short, a direct online business insurance company does not exist in Australia.

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As we mentioned before often it can be a pre-condition of trade that you purchase insurance – for example before market day if you’re a stall-holder or before allowing employees onto the factory floor. It can also be a reflection of your risk tolerance – is your mobile phone insured? What about your computer with all of your customers billing and contact details?

It pays to sit down and assess what your requirements are and there’s plenty of professionals out there willing to help (usually for a small fee!). Insurance may be a cheaper option than buying spare machinery or hoping that your car survives a hailstorm unscathed so it can also make sense when you’re trying to make your money work harder for you.

It can also help in your marketing campaign – for example if you’re a building company and need to guarantee your work. If your competitors are insured and you aren’t which builder would a customer choose?

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