Brokers have ‘perverted incentive’

A new entrant to the insurance market has been lambasted by brokers for trying to paint the agency model as a source of superior advice.

Dutch co-operative insurance operation Achmea set up shop in Australia last year and recently raised hackles by telling a rural newspaper that its practice of using its own risk advisors to review clients’ insurance cover was superior to the broker model.

Achmea CEO Timo van Voorden said: “Relying on brokers to sell insurance products creates a rather perverted incentive.

“A broker is looking to sell something which rewards him with the best commission, not necessarily getting the best deal for the client. It’s not really independent advice.”

Brokers have privately slammed the comments, and NIBA CEO Dallas Booth says while Achmea and brokers both distribute insurance, there is one critical difference.

“Brokers act in the best interest of their clients; not on behalf of the insurer,” he says.

“We think it’s about time companies were honest about that and say that their role is to act for and on behalf of the insurer and not pretend to be giving personal advice on insurance matters based on client’s individual circumstances.

“And while brokers often receive commission for their work, the insurance company’s agents are also paid for the services they provide, and that needs to be acknowledged too.”

Booth has also returned fire via the same newspaper, extensively defending brokers and their business practices.