Youi has provided “more compelling” small business insurance after switching to a direct distribution model, CEO Nathaniel Simpson told an inquiry today.

“Having been a shareholder in a business that distributes [through] brokers, it is very difficult, given the commission structures, for brokers to service some of these small businesses,” he said.

“The revenue for the cost of the service they need to provide may be inadequate, and that’s why we feel being able to directly serve those customers meets their needs on economics that work for us as a direct-to-consumer business, where those economics may not work for a broker, given the remuneration model.”

Youi sold its stake in underwriting agency Blue Zebra to Envest last year following a strategic review of its products sold through intermediaries.

Mr Simpson told the federal parliamentary inquiry: “When we take the limited capital we’ve got and deploy it to the opportunities we see in the market, we really felt we could have a more compelling offering to small businesses by doing it direct.

“Now I’m not ... saying that brokers don’t play an important role in the market. But we feel that because we have a strong brand and we have a really good ability to distribute direct to consumers, that can save cost and, as a result, we can pass those savings back to our customers through lower premiums, which solves their number one challenge.”

The Joint Committee on Corporations and Financial Services inquiry is examining insurance challenges facing small businesses. It is expected to deliver a report by October 27.

Mr Simpson says Youi plans to expand its small business insurance range.

“We have some product innovations coming to market in due course … that is a key area of focus for us. By our maths, and it is full of assumption, we estimate that we do about 5% of the small business insurance, and we do that all direct to customers.”

He says brokers provide “comprehensive advice” that requires “detailed analysis”.

Asked by the committee if commissions for small business packages are generally insufficient to support such accounts, Mr Simpson said: “If it is small businesses, yes, because of the level of advice [brokers] need to provide and all of the work they need to do to be able to service those businesses.

“If you run a small and simple business, you may not need that level of advice and all of the sophistication and complication that comes with it.”

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