Ag insurance sector returns fire

The broking industry is instead urging farmers to think twice about locking into a policy contract sold directly by any specific insurance company's personnel without first seeking an independent evaluation of the options from a broking agent.

"Buying directly from an insurance company or their agent means you get that specific company's product, regardless of whether it is the most suited to your farming operations," said National Insurance Brokers Association (NIBA) chief executive officer Dallas Booth.

"You are not likely to be told about other policies that might be more suitable for you."

Mr Booth's comments were prompted by recent remarks from insurance company boss, Timo van Voorden, who heads up the relatively new Dutch co-operative-owned Achmea Australia, a specialist rural insurer aligned with agricultural banker Rabobank.

Mr van Voorden noted that unlike many insurance companies which pay commission to brokers to promote their products, Achmea was building a national network of its own 26 risk advisors who made annual on-farm advice and reviews of clients' insurance coverage.

He suggested relying on brokers to sell insurance products could create "a perverted incentive" to favour insurance packages which offered the best commission rewards and this may not necessarily achieve the best independent deal for the client.

The influential NIBA, representing 400 broking firms and more than 2600 intermediaries handling almost 90 per cent of all commercial insurance transacted in Australia, is far from impressed with that implication of brokers' priorities.

Mr Booth was "astounded" Achmea had suggested it was "somehow providing more independent advice on farm insurance than brokers by employing its own in-house risk advisers".

"Insurance brokers are committed to a code of practice which requires them to work in the best interests of their customers," he said.

Brokers, who annually handled $18 billion and placed about half Australia's insurance business, were required to be fully transparent, disclosing commission percentages associated with a policy and their own remuneration arrangements.

While commissions were common in general insurance, Mr Booth said they were also paid directly by insurance companies like Achmea to their own agents and distributors.

"The key issue is whether the policy covers the farmer's risks, and whether the sum insured is appropriate," he said.

"If you need advice, the best source of information is an insurance broker."

A typical broker's portfolio of farm insurance policies sourced from various insurance companies could involve commissions ranging from 14.5pc to about 20pc, according to managing director of the Adelaide-based national insurance broking group MGA, Paul George.

Mr George said commission had "no bearing whatsoever" on which insurer his firm's brokers placed business with, noting the insurer whose cover MGA considered best in most farm market situations only paid 14.8pc commission.

Most of his firm's farm-related business, which spanned 36 offices from the Eyre Peninsula to Bega on NSW's South Coast and Roma in western Queensland, was covered by tailored and in-house products developed through close relationships with the sector since the 1970s.

Policies were adapted to fit different farms' situations and required brokers to have built up considerable experience about the true costs associated with everything from irrigation rigs to fence losses in bushfires and workplace health and safety liability coverage.

NIBA's Mr Booth noted the run-up to June 30 was an ideal time for farmers and rural businesses to review their insurance arrangements.

Ensuring end-of-financial-year equipment purchases were covered, and any under-insurance or crucial gaps in insurance coverage were detected, could avoid the risk of serious consequences to a farm enterprise in the event of a claim, he said.