Insurance brokers accused of ‘inherently unfair' commission structure that favours higher premiums
It claimed that the higher the premium a broker will secure for a consumer from an insurer, the more money the broker will make in commissions. It said broker commissions account for 'an increasing proportion of the overall cost of insurance'.
It said other professions are precluded from charging a fee based on a percentage of the product or services and said this is something that also needs further examination.
In a submission to the Department of Finance, as part of the public consultation on a new Action Plan for Insurance Reform, the Alliance for Insurance Reform said: 'Many brokers now charge a fee based on a percentage of the cost of the policy. This is inherently unfair to consumers as the 'worse' the premium they secure for them, the more money they will make.'
The Alliance called for a detailed examination of the brokerage market in Ireland to be carried out, with strong consumer input.
Commissions paid to brokers for selling motor insurance were 14pc of the premium in 2023, according to the Central Bank of Ireland's 'Private Motor Insurance Report', issued last October.
A separate Central Bank report found the average motor premium is now €616. This means brokers earn €86 on the average motor premium. Both motor and home insurance costs have been rising now for months.
Asked for a response, Brokers Ireland, which represents the sector, said the claim that brokerage charges account for 'an increasing proportion of the overall cost of insurance' lacks a clear evidential basis.
It said the Central Bank's Consumer Protection Code mandates full disclosure of fees and commissions at the point of sale. Brokers Ireland said consumers are fully informed of how brokers are remunerated. 'Furthermore, insurance brokers typically work to reduce overall insurance costs for consumers by sourcing the most competitive and appropriate cover,' it said.
It said the suggestion that percentage-based commissions are 'inherently unfair' misrepresents how insurance intermediation works.
'Commission-based models are a long-standing and internationally accepted form of broker remuneration, aligned with the interests of consumers,' it said.
'Insurance brokers are incentivised to deliver appropriate cover, value for money and ongoing service – all of which drive client retention and trust.'
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