If you didn’t already know, in Australia many insurance brokers chose to join buying groups – commonly referred to as ‘cluster groups’, presumably to achieve better cover for you. As a buying group, they can negotiate better terms and conditions with underwriters. The problem however is that soon enough, every other buying group ends up with the same terms and conditions (i.e. policy wordings)!

Buying groups also serve to enable greater competition against the largest competitors out there: Aon Risk Services and Marsh – the world’s two biggest brokers. In case you missed your last Aon phone call at renewal you’ll probably won’t get one as your premium only represents a tiny proportion of the commission they would otherwise receive chasing larger clients.

We’re not sure about you but we’d rather support the ‘little guy’ as presumably they offer better service and will be there when I need them most – come claim time. Unfortunately however sometimes, the little guy gets caught up in ‘big guy’ talk and align themselves with buying groups with interests other than yours – for example getting better commissions from insurance companies. Fair call if you’re a small broker dependent upon these commissions, but the reality is that commissions are merely an expense factored into the insurance companies pricing – meaning that if it goes up, so too will your premiums…

Which is why we are always amazed when buying groups such as Austbrokers or IBNA (now combined as AIMS) hold lavish conferences for their members and suppliers (i.e. insurance companies) in exotic locations. For insurers attendance is effectively compulsory, as they need to demonstrate their support – so they typically send a handful of sales staff along, to enjoy the sights in Cape Town, South Africa for example (AIMS conference in 2010). The conference in Cape Town for example attracted over 320 delegates including presumably, the majority of the 120 odd AIMS-affiliated brokers.

Of course, if you haven’t guessed it already this only adds to the insurance company’s expenses and therefore your premium. If you’re also lucky enough to get charged a ‘risk management’ fee or an ‘advisory’ fee or any other sort of wonderful broking fee this might be another reason why their costs are so high – we wonder if your broker is part of AIMS or some other buying group?

Indeed, in a recent interview with insuranceNEWS.com.au, AIMS General Manager Mr McAvenna concluded, “the best way to engage more effectively with insurers will be by holding our next few conferences in Australia”. Hmmm.