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.

Parkes Shire Council director of corporate services Les Finn said years ago they, along with many other NSW councils, joined Statewide Mutual to among other things seek out competitively priced premiums for insurance costs.

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JLT was then appointed as the mutual’s insurance broker to source the best-value policies available for the member councils.

However, Mr Finn said three years ago when Parkes council was reviewing its costs discovered that they could obtain cheaper insurance premiums if it left Statewide Mutual and went out on its own.

“In the first year we received a 42 per cent decrease in our insurance policy [cost], this was equivalent to $230,000,” he said.

“We estimate it’s been around $230,000 a year for 10 years that we paid too much.”

Parkes council was not alone is paying excessive premiums for insurance across many years, law firm Quinn Emanuel Urquhart and Sullivan (QE) managing partner Michael Mills said.

QE filed this week’s class action on behalf of all local councils in NSW and Mr Mills said many of them were still with Statewide Mutual with JLT working as the insurance broker.

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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.

Mr Finn said he expects Parkes residents to be disappointed that such a large amount of money had not been spent in the community and had instead been paid in alleged excessive premium costs.

“I would hope they are as disappointed as council because we entered into what we thought was an ethical relationship,” he said.

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“I think this community would be disappointed that an international organisation would collectively take advantage of NSW councils.

“This money is nearly equivalent to three-quarters of a rate peg.”

Mr Mills said a successful outcome of the class action would be if the councils were to receive back the funds that they had overpaid.

Mr Finn said: “A win for Parkes would be a refund of most, if not all, of the overcharged premiums”.

“We would hope we would favourably recover the lion’s share of our claim … but it’s got to be argued in court first.”

More information is available on the JLT Local Council Class Action website.