Expert industry consultant John Trowbridge says commissions earned by brokers should always be disclosed to commercial clients – as he recommended in a report two years ago.

As insuranceNEWS.com.au has reported, the National Insurance Brokers Association (NIBA) has revised its new code of practice so that commission disclosure requirements relate only to retail clients. 

Previously the code said brokers must also declare commissions to small business clients, but some NIBA members said this was too complex to implement, and that reference will be removed.

In 2021 Mr Trowbridge completed a report on commercial insurance for the Insurance Council of Australia (ICA), looking at ways to improve the affordability and availability of cover.

One of his recommendations was that commissions continue, but that “brokers disclose on all customer quotes and invoices as part of the premium all insurer commissions and any other payments they will receive from the insurer”.

The report acknowledges broker value, and that commissions are embedded in the marketplace “for good reason”.

But it says in “most cases” there is a lack of disclosure of commissions to commercial clients, and that this is “an impediment to open debate and to greater trust of both insurance brokers and insurers”.

“Insurance buyers do not therefore know how much brokers are being paid for the role they play nor whether there are any incentives that might create conflicts of interest for the broker,” the report says.

The ICA endorsed all Mr Trowbridge’s recommendations, and he told insuranceNEWS.com.au today that he stands by his findings.

“Nothing has changed since then that would alter my view of the situation,” he said.

“I don’t see any particular reason why commercial customers, especially smaller ones, should be considered different from retail customers.”

Steadfast CEO Robert Kelly says he understands why the NIBA code was adjusted in the wake of the Quality of Advice Review, but believes the position may need to change again if there is growing demand for greater transparency.

“In the spirit of what Hayne had put forward and in the spirit of consumerism, [expanding the disclosure requirements in the code] seemed a good thing to do,” he told insuranceNEWS.com.au.

“But there was push-back from various sections of the broking fraternity who said ‘why are you going to step past legislation? Is NIBA going to become the regulator now, and step over the top of the Corporations Act?’

“I don’t think that NIBA’s position needs to transcend the government’s position in terms of how they’ve legislated.

“However, I tend to think if people are worried about disclosure, that speaks to its own position. If consumers ask for disclosure, and people who deal with consumers are worried about that disclosure, then that’s a position that maybe needs to be reconsidered.

“If there is a groundswell of people that think that should happen, then the industry should accommodate it. But there doesn’t seem to have been a groundswell of people that are concerned about it at this stage.”

NIBA says including small businesses in the code requirements added complexity for little value, and that it is best to be consistent with the Quality of Advice Review, which focuses purely on retail customers.

It says the new code wording will be distributed shortly.