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Broker code committee urges premium funding training

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The Insurance Brokers Code Compliance Committee has recommended more training on premium funding and a focus on measures to assist clients in financial difficulty as the COVID-19 pandemic continues and some clients face natural disaster impacts.

An Own Motion Inquiry recommends regular training so existing and new staff have up-to-date information on premium funding arrangements, which allow clients to spread instalments over a year and to consolidate premiums from a number of policies into one payment.

It also proposes specific training to help staff identify financial difficulty triggers and says policies and procedures should be in place for assisting and responding appropriately.

“In recent times we have seen businesses of all sizes suffer financially due to the COVID-19 pandemic and, in some cases, extreme weather events such as bushfires and flooding,” the inquiry report says.

“With the pandemic continuing to have an impact and extreme weather events set to continue, more challenges will lie ahead for Australian businesses, and financial difficulty will be an ongoing issue to which the industry must respond.”

Brokers should make it clear to clients that they are entering into a third-party arrangement with a premium funder, and ensure they understand the risk of policy cancellation if payments are missed.

“Ensure the client understands their obligations to the premium funder and should financial difficulties arise work together to find solutions so that all parties are appropriately informed,” it says.

The report finds about 95% of code subscribers offer premium funding, mostly from external firms. Providers include IQumulate, Hunter, Elantis, Bank of Queensland, Attvest and Premium Funding.

The amount of commission brokers receive from funders depends on the premium size and the type of product involved.

At one end of the spectrum, some brokers receive an average commission of 40%, while at the other end they may earn around 0.5% to 3%, particularly for higher premiums, the report says.

Premium funding accounted for only 2.3% of all complaints in 2019, the Own Motion Inquiry says.