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27 April 2021
The Insurance Brokers Code Compliance Committee has criticised a draft update of the code of practice for failing to sufficiently elevate cultural and behavioural standards and has called for a stronger stance on conflicts of interest.
“The code must go beyond the law wherever possible,” the committee says. “For the code simply to restate the law is a waste of time, dangerous and misses the point.”
A discussion paper released earlier this year alongside amendments suggested by the National Insurance Brokers Association (NIBA) says proposed changes seek to extend standards beyond legal obligations.
But the compliance committee submission considers NIBA’s proposals to be “very minimal” and says the new document, which will amend the previous 2014 version, needs to catch up with the law and then go beyond.
Independent reviewer Marigold Magnaye will be reviewing submissions and other feedback on revisions to the Insurance Brokers Code of Practice before making recommendations to the NIBA board on a revamped document on July 30.
The code governance committee says NIBA’s proposed changes around remuneration transparency also are “not good enough” and focusing on “proper disclosure” sounds like a minimum legal requirement in a Financial Services Guide.
“The key issue cannot be information disclosure or transparency, brokers need to commit to managing and eliminating conflicted remuneration,” it says.
The committee says the upcoming Hayne-recommended review on whether the exemption from the ban on conflicted remuneration remains justified for general insurance is a chance for NIBA to “get ahead of the game” on the issues.
The submission, which notes volume payments, profit share agreements, management fees for services and non-monetary incentives, says the code should commit to eliminating controversial and inherently conflicted remuneration identified by the Australian Competition and Consumer Commission.
“NIBA will need to explain why the commission model is suitable and should consider funding a piece of research on this as part of the code review,” it says.
The committee calls for the use of plain language and clearer formatting and says the code does not currently address brokers’ obligations to assist vulnerable customers.
NIBA has previously said the draft code changes reflect “initial thoughts” and design, layout and readability issues will be addressed before the revised code is finalised.
“We take very seriously the submission from the code committee and the other submissions we have received,” CEO Dallas Booth told insuranceNEWS.com.au.
“The timetable allows quite a significant period of time for both the reviewer and NIBA to give very careful thought to the submissions. This is a transparent process.”
The revised code of practice is set to be finalised in the second half of the year and launched at the NIBA convention. The document is due to come into effect later next year after training and the roll-out of assistance to subscribers.