Insurance brokers' incomes could take a hefty knock if insurers reduce standard commission terms, the British Insurance Brokers' Association (BIBA) has warned.
Two companies, AXA and Avon, have announced their intention to reduce commissions and have said that falls in brokers' incomes will be offset by premium increases.
BIBA said it rejected this suggestion and was urging insurers to consider practical alternatives to the commission cuts, which could be as much as 50%. Liability and the Motor Fleet businesses are expected to be hardest hit.
The Association said it had initiated a series of discussions with its Partner insurers (including AXA and Avon) with a view to seeking concessions for BIBA member firms.
BIBA chief executive Mike Williams said BIBA shared brokers' concerns about the cuts.
"Brokers will suffer substantial reductions in income, at a time when we are having to explain insurers actions to our clients and to support insurers in their attempts to apply major increases in premiums across the board, and in the Liability classes in particular.
"The insurers' actions are opportunistic, ill timed and could set a dangerous precedent. This is not the time for insurers to take action that would cause irreparable damage to their trading partners' businesses," he said.
He urged insurers to work with brokers as partners to find ways of reducing costs through improved efficiency and by removing much of the existing duplication of effort and poor service.
BIBA's practical alternatives are:
1.Commission levels are often negotiable on a broker-by-broker or case-by-case basis. BIBA suggests that insurers should make this clear to all brokers to whom they offer agency facilities.
2.Explore net premiums in suitable cases, leaving the broker to add his commission or fee for his professional services.
3.Gross premiums are increasing. Any premium should be sufficiently flexible to maintain the insurer's required net premium whilst maintaining the existing commission percentage.
Williams added: "All of these points are being raised in our discussions with insurers and we will report progress to members as soon as possible.
"In the meantime, we urge members to respond to any attempt by insurers to impose commission reductions immediately, insisting on individual discussion of the options. We welcome any information from members that will help us in our ongoing negotiations."
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