Brokers warned stakes high on payment transparency

Transparent disclosure of commissions, fees and charges is critical to trust and confidence in the industry and in averting heavy-handed government action, consultant John Trowbridge told the National Insurance Brokers Association (NIBA) convention today.

Mr Trowbridge says the lack of visibility around general insurance remuneration has been a problem and will come under scrutiny as part of a Federal Government review of financial advice that will be completed this year.

“With the Quality of Advice review coming up, if the insurance industry, and in particular the broking industry, doesn’t deal with that, then I think you are at risk of the Government forcing the issue in some way,” he said.

Outcomes in that case could include controls over commissions or, in a worst-case scenario, banning the payments, he said.

“I think that would be a very bad move,” he told the Adelaide leg of the multi-city convention. “In order to clear the decks so the issue can be looked at thoroughly, I do think disclosure of commissions and avoidance of conflicts of interest around incentives should be tackled.”

Mr Trowbridge last year completed a report commissioned by the Insurance Council of Australia (ICA) on affordability and availability issues in the commercial market.

NIBA plans to launch its revised code of practice, which includes tougher measures around disclosure remuneration and conflicts of interest, on March 1.

CEO Phil Kewin said today the code would ban preferential remuneration, such as volume-based commissions, and contingent remuneration, unless under a binder arrangement. The strengthened document includes increased disclosure requirements, obligations to report brokers who breach the code and commitments to identify and support vulnerable clients.

Mr Kewin says support materials and guidance templates have been developed and the group has engaged with industry training organisations.

NIBA expects the new code will be implemented from November 1, ahead of the expected December 16 delivery of the Government’s advice and broker remuneration review.

“It is really important we have a new code, in effect, and everyone up and running before that date,” Mr Kewin said.

NIBA President Dianne Phelan earlier told the conference that the advice review’s broad terms of reference would encompass the wider general insurance remuneration system as well as life insurance and financial advice.

“I know the insurers have already been contacted by Treasury to provide information and no doubt at some stage information will be sought from brokers,” she said.

“Don’t be surprised if at some stage you receive a request for information and do remember that this is a review, it is not an investigation, so the more we can co-operate and collaborate the better.

“We continue to be in constant contact with insurers, the ICA, government and regulators in relation to this review.”

The NIBA convention will continue from Perth on Monday afternoon, before travelling to Brisbane on Wednesday and wrapping up in Sydney on February 21.