NEWS
No-commission option a hit An insurance broker who has started a new firm offering zerocommission insurance to clients says it feels like a good fit. Dan Donaldson runs InsuranceBroker.kiwi, which he started in 2014. It offers general insurance advice to clients based on a set fee. Commissions are credited back to each client. “I just felt there was an opportunity or desire by clients for brokers to be more transparent about costs,” he said. “They want to be able to measure the service they receive but in order to be able to measure the value you need to know what you are paying.” Donaldon’s firm would start with a discussion about client expectations and requirements, and then set a fee that was realistic based on that. “It could be more or less than the cost of commission, it’s individually tailored to suit their requirements.” Donaldson said the fee was not based on an hourly rate because he did not think time-based charging created the right incentive for the customer or the broker.
With annual policies and a rapidly changing market environment, he said the fire and general space was well-suited to a different remuneration model. It was not necessarily fair for brokers to be remunerated based on the cost of policies, he said, because market cycles could change the cost of premiums a lot. After Christchurch’s earthquakes, many policies became significantly more expensive. It did not make sense that brokers would earn more just because insurance was going through a more expensive period, he said. “We found that commission creates a conflict of interest around those cycles. I would rather remove that from the discussion.” But he said it was important not to create the impression that there was anything untoward about brokers being paid commission. “There are a lot of good people in the industry,” he said. InsuranceBroker.kiwi partners with life insurance advisers who charge commissions. Donaldson said that was a significantly different industry with other dynamics at play and did not suit the no-commission model.
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