MID-WESTERN Regional Council has joined a class action following what it claims is a loss of hundreds of thousands of dollars due to alleged excessive premiums charged for insurance policies.
The class action was filed this week against multinational insurance broker Jardine Lloyd Thompson (JLT) who was acting on behalf of many of the state’s 128 local councils through Statewide Mutual.
Mid-Western Regional Council director community Simon Jones confirmed on Friday that they have joined the class action against JLT.
He said council, and its predecessors Mudgee Shire and Rylstone Shire councils, received broking services from JLT from 1994 to June 2017.
“In 2016, Mid-Western Regional Council began the process of tendering for its insurance brokerage services,” he said.
“This resulted in savings of around 30 per cent on the insurance premiums that we had been paying previously.
It is estimated that there was a saving of around $300,000 for the first year alone as a result of going through the tender process, leaving Statewide Mutual and changing brokers.Mid-Western Regional Council director community Simon Jones
“It is estimated that there was a saving of around $300,000 for the first year alone as a result of going through the tender process, leaving Statewide Mutual and changing brokers.
“Mid-Western believes we may have been overpaying for insurance premiums for many years based on the advice of JLT.”
Law firm Quinn Emanuel Urquhart and Sullivan (QE) this week lodged the class action on behalf of all local councils and managing partner Michael Mills said many of them were still with Statewide Mutual.
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“They’ve been overpaying for many years,” he said of the mutual’s member councils.
Mr Mills said it was not uncommon or large corporations and businesses to seek out a broker to secure competitively-priced insurance policies due to the complex nature of the premiums needed.
He alleges that JLT did not “shop around” for better priced insurance policies for councils and that it may have had a “conflict of interest” in selecting higher cost premiums that led to commissions for JLT.
They’ve [local councils] been overpaying for many years.Quinn Emanuel Urquhart and Sullivan managing partner Michael Mills
Mr Jones said the decision to join the class action came only after serious consideration.
“We had believed that JLT was providing the best advice regarding our insurance with Statewide Mutual, and ensuring we paid the correct amount for our insurance,” he said.
“Given that the majority of councils in NSW were part of the Statewide Mutual Scheme, it was believed that this economy of scale would provide the best result for our community.
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“However, we now believe that we have been misled over the course of many years by a company we trusted to do the right thing.”
Mr Jones said Mid-Western Regional Council wanted to achieve the best and fairest outcome for the community it represented.
“We believe these funds could have been spent on important community infrastructure like roads, pools and bridges,” he said.
“No cost will be incurred to ratepayers as a result of council joining the class action.”
Orange and Parkes councils have also joined the class action, with Parkes Shire Council hoping to claw back an estimated $2 million paid in excessive premium charges during a 10-year period.
Parkes council director of corporate services Les Finn said it was only when council left Statewide Mutual and put their insurance costs out to tender that they realised money could be saved.
“In the first year we received a 42 per cent decrease in our insurance policy [cost], this was equivalent to $230,000,” Mr Finn said.
“We estimate it’s been around $230,000 a year for 10 years that we paid too much.”
More information is available on the JLT Local Council Class Action website.