Brokers may be facing a reduction in the commissions they receive from insurers following a call for reviews.
Allianz and AXA are looking to review commission payments although RSA has decided to not show its hand yet and taken a ‘wait and see’ approach.
Zurich and Aviva say they will not be taking any action.
A source said: “You cannot pay 40 to 45% commission on SME business and have that for the long term.”
Allianz Commercial has advised that due to not getting the rate strength they need, they are looking into other ways to save money. In wanting to keep their prices competitive they are reviewing all outgoings, which includes brokerage commission.
Zurich Commercial however, stated that they had always been careful when it comes to their outgoings and commission payments. They stand by the commissions that are in place as they agreed to long term arrangements, with a source for Zurich maintaining that those arrangements are still sustainable.
One strategy looking to be employed is to reduce the commission slightly over the next two years, looking to bit by bit remove the percentage paid out. This would differ to the approach Aviva sought after two years ago which was a lot more aggressive.
The economic downturn has seen the relationship of brokers and insurers struggle, as brokers are unable to retain business for the insurers and increase business. Customers are putting the pressure on brokers to find cheaper insurance and so they have to look elsewhere for cheaper policies, rather than being able to provide return custom for insurers. The knock on effect from this has evolved to the point where Allianz and AXA now have to review their commission rates.
As costs continue to rise from recession-related claims, insurers are feeling the pinch.
One unnamed source said, “Claims are going up which is forcing premiums up which is turning away business. There is no easy answer but a simple solution seems to be that if commission rates drop, then so do expenses, retaining money to pay claims.”
By Ben Malkin
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