The National Insurance Brokers Association (NIBA) has launched a first-of-its-kind report, prepared by Deloitte Access Economics, The economic value of insurance broking.
NIBA CEO, Dallas Booth said, “An important new report on the role and value of insurance brokers, and of insurance broking, in Australia. I urge all insurance brokers to have a good look at this report, and share the key findings with their business and community contacts.”
The study represents the most comprehensive analysis of insurance broking ever undertaken in Australia. As well as examining the economic value, the report describes and quantifies the elements that comprise the industry’s value: to customers, insurers, governments and broader society.
NIBA President, Eric Harris of Aon said, “This is an important report and will serve as an excellent basis for NIBA to undertake a communications program to make sure that people in government, Members of Parliament, regulators, Ombudsmen and other relevant stakeholders have clear information regarding the role of insurance brokers, how they operate, and the value they bring.”
“Yes, insurance brokers are intermediaries. But they offer real support, and most importantly genuinely valuable advice, in the areas of risk, risk management and risk financing – something not done by other professionals.”
Booth explained, “In 2018-19, insurance broking collectively contributed nearly $2.6 billion in gross value added (GVA) to the Australian economy, and directly employed 15,000 full-time equivalent (FTE) 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,” he added.
“The industry also indirectly supports economic activity in other businesses, worth almost $900 million in 2018-19, supporting over 5,000 extra jobs.”
Insurance brokers help business clients during crises, like the 2019-2020 bushfire season and the COVID-19 pandemic, but also to better understand long-term emerging risks to business, such as from climate change and cyber security threats.
Insurance broking also provides wider economic benefits:
• encouraging greater competition in insurance, with the average NIBA broker offering products across 10 different insurers,
• reducing underinsurance, with 45 per cent of new broker clients being underinsured prior to engaging a broker,
• using their experience to provide advice and save clients’ and insurers’ time, regarding risk assessment, policy selection or claims.
“The prevalence of broker use throughout the economy and across all types and sizes of businesses speaks to the value that organisations place in them,” Booth said.
Fifty-four per cent of clients pay the same or less on their insurance after engaging a broker.
The author of the report, John O’Mahony, Partner at Deloitte Access Economics, said: “Insurance broking is not as simple or transactional as walking into a store and buying a good. It is a relationship-based business that involves up to 10 pre-sales and post-sales services and creates many sources of value.”
“We analysed information provided by 421 individual brokers, 78 brokerage businesses, and the six largest insurance broking businesses. We consulted senior staff at three insurance companies, two small business clients and representatives from the LMIGroup, to help understand the stories behind the statistics. All up, we consulted almost 100 different articles, reports and data sources about the sector.”
The report highlights the key role brokers play in the market for general insurance in Australia and provides evidence of brokers facilitating a more efficient insurance market, which supports risk management and economic recovery across society.