The National Insurance Brokers Association (NIBA) has given its members an updated view on the complex question of how – or if – they need to disclose in statements of advice (SOAs) for retail clients the remuneration they receive from an insurer for performing its back office services.

CEO Noel Pettersen says the Australian Securities and Investments Commission (ASIC) “has not formally approved or contested” the views expressed in the circular, and NIBA will inform members if ASIC indicates any specific concerns.

“The decision as to whether or not to disclose the remuneration is a matter for the individual broker,” he said. “Brokers need to carefully consider their legal obligations and seek their own professional advice.”

Basically, where remuneration from insurers “might reasonably be capable of influencing the advice given in the SOA”, all benefits received from the insurer should be disclosed in the broker’s SOA.

Mr Pettersen says the then Minister for Financial Services and Regulation, Joe Hockey, indicated in 2000 that remuneration for providing back office functions for an insurer does not need to be disclosed in an SOA. The two important requirements for this were that the service must be performed at the behest of the insurer; and the payment for the services must not exceed the cost of performing it.

NIBA’s view is that brokers could satisfy the requirements by an arm’s-length written agreement with the insurer outlining the back office services to be performed and the remuneration payable by the insurer. They should also identify each of the services involved and make their own realistic estimate of the cost of providing the services.

“Each case has to be considered individually,” Mr Pettersen said. “It is only remuneration in respect of the cost of performing back office services for the insurer that need not be disclosed.”

NIBA has also raised with Parliamentary Secretary to the Treasurer Ross Cameron questions about the need for detailed commission disclosure in financial services guides (FSGs), pointing out that Mr Hockey said no dollar or percentages amounts would be required. “It is only if detailed commission disclosure is required that back office costs become an issue in regard to FSGs,” Mr Pettersen said.