Insurance brokers place close to nine out of ten of their clients with the companies offering the lowest available quote, according to research that will be presented to the Competition Authority today.
The Irish Brokers' Association (IBA), which represents the majority of the 2,500 intermediaries in the non-life sector, has made a submission to the authority responding to concerns it raised about their commission costs and other issues in a report last February.
The report stated that brokers' commissions came to €134 million of the €1.6 billion spent on insurance in the Republic during 2002. It also said that while the cost of liability insurance rose 94 per cent from 2000 to the end of 2002, commissions increased by 126 per cent.
In the motor market, commissions increased by 51 per cent, while costs rose 21 per cent. Competition Authority chairman Mr John Fingleton argued that individual insurance companies did not want to cut commissions, as this would mean they would lose brokers' business to competitors.
The report prompted the IBA to commission independent research of its members' practices. It says that the results, part of its submission to the authority, show that brokers recommend the lowest quote to the majority of their clients.
In the private motor market, brokers placed 83.4 per cent of business with the companies offering the lowest quote, and 15.8 per cent with the next lowest. In the commercial motor market, brokers placed 90 per cent of clients with the lowest quote and 9.6 per cent with the next lowest. In employers' and public liability, 94 per cent of clients were placed with the lowest quote.
According to IBA president Mr David Cowman of Coyle Hamilton, brokers only recommend higher quotes in circumstances where they believe it's in the client's best interests, and the client knows about it. He added that, in some cases, clients themselves opted for a company asking more than the lowest quote because they had established a relationship with the insurer.
In an interview with The Irish Times, Mr Cowman rejected that brokers favour high quotes because this increases their commission.
"Any broker who did that would lose his livelihood, the clients would walk," he argued. "Apart from that, it's a regulatory requirement. If IFSRA came in and did an audit and found that the broker was routinely giving higher quotes to the client, they wouldn't pass the audit. IFSRA takes this seriously."
