Middlesea cuts commission rate on property insurance to agents

Middlesea Group has reduced the commission rate on property insurance to its agents by an average of about 16 per cent, based on a sliding scale depending on the loss ratio of the agent's portfolio, Middlesea chairman and chief executive Mario Grech said.

The agents were informed of the new commission schedule in a circular. The new sliding scale schedule is similar to one introduced earlier by the insurance company for motor insurance.

Mr Grech explained yesterday that the decision had to be taken in the light of insurers' and reinsurers' negative financial results over the past 24 months, including September 11, and the volatility of capital markets which also affected their investments.

However, he explained that they had adopted a two-pronged approach: they opted to reduce the commission as the consumer would otherwise have had to face increased costs; at the same time they wanted to give agents an incentive to be more selective about the kind of business they underwrite - hence the sliding scale which rewarded low losses.

"We need to go back to basics and apply correct pricing for the protection being offered, commensurate with the risk accepted," he said.

"At the end of the day, consumers still look at more than price: they look at service and they look at the fact that our reinsurers are the top five in the world."