Broker v Supermarket

Insurance: Why a broker is the best option

There is a significant push on selling insurance products through mainstream retailers. Their foray into insurance is a calculated move that relies heavily on the established reputation of these retailers to provide convenience and savings in commoditised household goods.

It’s a tactic popular with banks as they design products that will try to cater for all financial needs of their customers, and thereby, keep them ‘in house’.

So what’s the difference between insurance brokers and the direct sellers?

Both earn a commission from the placement of cover with the insurer. The product the client receives is only as good as the results when it’s needed at the time of a claim.  The role of the insurance broker is to provide professional, advice-based service that represents the client’s best interests. The broker has a suite of product options available depending on a clients’ circumstances, cover requirements and affordability.

The direct market relies on promoting a cheaper product as the bottom line. This is heavily supported by mass media advertising that keeps the subject matter in their campaigns light on detail and high on entertainment value – think of domesticated aliens, man folding underwear at counter, French girl struggling with Aussie accent, happy customers portrayed by actors etc. The product is deliberately made cheaper by using strict acceptance criteria and restricting policy coverage and benefits.

A recent study by Vero Insurance surveyed business owners as to why they prefer to deal with a broker.  A common theme in the feedback was that a broker would see many claim scenarios and may be able to suggest the most appropriate cover based on previous experiences. This gave business owners more confidence rather than trying to understand the complexities themselves.

An important factor in any insurance buying decision should be how claims are settled.  Brokers often recommend insurers based on their ability to provide excellent claims service.  Insurance contracts and claim settlements can be complex and having professional guidance through the process is invaluable. Policy wordings often have limits, sub limits, conditions and exclusions that can potentially create situations where confusion reigns and the insurance industry is perceived as untrustworthy and deceitful.

The broker has the ability and responsibility to eliminate this confusion and provide the most suitable product for the clients’ needs.

If price is ever the single most important criterion in the insurance buying decision, then there can be benefits in using direct market insurers.  However, always bear in mind that when price is optimised, the quality of cover usually suffers. Cheaper policies have strict acceptance criteria and the retailers’ call centre consultants have scripts to follow.  The highly regimented and efficient transaction process is designed to deal with the large volume of phone calls. Closing the deal is likely to be the number one priority.

Household workers need cover too

Low-cost protection for workers in the home

Do you have a regular gardener or cleaner at your home or holiday home? Or maybe you have a paid child-minder at your residence on your social nights out? Have you considered if you require Household Worker Insurance?

If you have paid help at your domestic residence, Household Worker Insurance is critical. A single work-related accident can leave you, the employer, liable for thousands of dollars in medical bills. Even worse, it could lead to a common law claim, which could involve a lump sum payment for loss of future earnings, pain and suffering, permanent impairment etc., which could amount to millions of dollars.

Don’t assume you have domestic worker protection under your home and contents policy.

Under the Household Worker Insurance policy offered by WorkCover Queensland, you are covered for the cost of compensating a household worker in your employ who sustains a work-related injury while working for you. These costs may include lost wages, travelling expenses, hospital, medical and rehabilitation expenses and other associated costs.

The policy is only $50 for a two-year term. For more details head to the WorkCover Queensland website or contact your insurance broker.

Employee or Contractor? ATO target employers

The Australian Taxation Office (ATO) has stated their intention to increase their audit focus on businesses that use contractors.

An incorrect employment classification of an employee / contractor could be a breach of both ATO and Workers Compensation legislation.

If ATO determine that your contractors are employees, you would have a shortfall in your Superannuation and PAYG payments and subsequently incur interest and penalties. In theory ATO can go back an unlimited period to collect the superannuation and PAYG for employees.

In past years there was confusion for business owners about the definition of a worker as the ATO definition was different to WorkCover Queensland’s definition.

Today the definitions have been aligned. WorkCover Queensland has adopted the same definition as the ATO who supply a simple online decision tool to identify ‘Employee or Contractor’.

You can check your circumstances by logging on to:

http://www.ato.gov.au/Calculators-and-tools/Employee-or-contractor/

You are asked to answer a series of questions

  • Is there an Agreement in place with the individual
  • Occupation of the individual
  • Does the individual have an ABN
  • Details of Subcontracting arrangements
  • Basis of payment for services
  • Responsibility for provision of equipment / tools
  • Who is responsible for Rectification of work?

At the end of the questionnaire a decision is provided based on answers given. You are able to enter personal details and a report can be produced for you to print /save. Retain a copy for your records and if audited, you have a documented basis on which you made your decision.

An important factor is the existence and content of a written agreement between you and the individual. You should consider obtaining legal advice in regard to any contractor’s agreement.

It is important to discuss all your labour arrangements with your CQIB insurance broker as contractor or labour-hire alters your exposures hence the need to tailor your insurance program to your specific needs.