Brokers fear for the future of personal lines products in the intermediated space after Hollard made another cut to commissions on home insurance sold via the Steadfast network.

The insurer told broking partners on Monday that the maximum commission for its home, landlord and private motor products on the Steadfast Client Trading Platform will be 10% from July 1.

The reduction comes after Hollard cut personal lines commissions on the platform to 15% in December 2023.

While Hollard says it remains committed to the broker channel, risk advisers warn the insurer’s decision will probably have wide repercussions.

It has stoked fears that other insurers will make similar moves. When Hollard last cut commissions, IAG-owned CGU, QBE and Allianz made similar changes, as did underwriting agency Blue Zebra.

Some fear Hollard and others will eventually go direct to consumers with personal lines.  

A Queensland broker who did not want to be named says the commission cut “is a bit of out of the blue … I am just thinking they are making more money from their direct channels so they are trying slowly to ease out of the broker market.”

He says more consumers “will start buying direct” as brokers still offering personal lines assess the latest commission reduction.

“It’s concerning … there’s really not a lot of income in it for advisers any more. The amount of work involved as compliance increases … it’s just making it harder and harder for brokers to afford to be able to do it.”

Broker John Usher says on LinkedIn that Hollard is displaying "interesting logic".

"They’re basically saying that if they try to push through the premium increases they need, they’ll be uncompetitive at current commission rates. Similar to what happened when Chubb ended up withdrawing from the non-prestige market.

"This fails to account for brokers potentially charging a higher fee to make up for lost remuneration."

Another concern relates to how insurers manage personal lines products in the direct and broker channels.

Matt Williamson, who runs brokerage Good Cover in Bangalow, NSW, said: “It shouldn’t be that we’re getting overly ‘expensive’ products in the broker market and we’re getting blamed for all the problems of the world.  

“The product is the same product. If we take the commissions away, the net of commission premiums for houses for brokers is still manifestly more than the direct market. That’s not right. What’s happening is brokers are effectively funding insurers’ direct market play. It’s not OK.

“Bear in mind that if Hollard is not distributing via brokers, then they’ve got to have a contact centre, they’ve got to answer the phone calls, they’ve got to deal with the claims, they’ve got to train the staff ... All of those things are as true for the insurer as for the broker.”

Rod Fitzgerald says on LinkedIn brokers should be paid for the "excellent work" they do.

"The concern I feel is not whether Hollard is sidelining brokers by reducing commission, which I doubt for many reasons, but rather if they have the scale and infrastructure to compete in the household insurance market at all. The last thing brokers need right now is one less [household] market available to them."

Hollard personal insurance products distributed by brokers are exclusive to Steadfast.

A spokesperson for Hollard told insuranceNEWS.com.au the company “has been a proud strategic partner of Steadfast for many years and remains committed to the broker market”.

They say the Steadfast portfolios “have been impacted by increased natural perils activity and claims inflation costs. These cost increases are being experienced across the insurance industry and amid ongoing cost-of-living pressures for customers.

“The broker channel remains a key part of Hollard’s business strategy and, as such, it was very important to have commissions set at a rate that allowed for the continued sustainability of these products for brokers and customers.”

Head of intermediated for Australia and New Zealand Stuart Byars told brokers on Monday that Hollard “paid out over $94 million in claims across our Steadfast home, landlord and motor portfolios, resulting in the overall performance of these portfolios remaining above our loss ratio targets.

“We have been monitoring these portfolios closely, and reviewing our risk appetite, and have determined that changes to commission rates need to be made to allow for the continued sustainability of these products.”

Victoria-based Roderick Insurance Brokers is bracing for the worst.

“If history is anything to go by, I would imagine other insurers will unfortunately follow suit [cutting commissions],” sales manager Paul Codd said.

“We question the motives around this drop in commission rate given the cost of arranging domestic insurance for clients is increasing for the broker.”