The National Insurance Brokers Association (NIBA) has called on the Financial Ombudsman Service (FOS) to clarify “conflicting” aspects of its proposed terms of reference.

In a submission to Chief Ombudsman Colin Neave, NIBA CEO Noel Pettersen outlined what he says is an inconsistent approach to the treatment of small business insurance products. The brokers’ disputes resolution scheme became part of FOS on January 1.

NIBA consultant John Hanks told insuranceNEWS.com.au that some of the suggested terms go further than is required by law, and the definitions could cause confusion in their current form.

In the submission, Mr Pettersen says the terms contain “two different definitions [that] apply to similar situations”.

“…There is considerable doubt and confusion as to which definition applies to those that were members of Insurance Brokers Disputes Limited.”

NIBA is also concerned that the two definitions exclude liability claims in reference to general insurance disputes but include them in the definition used for broker disputes.

NIBA has instead proposed that a single definition of small business insurance products be applied uniformly to all FOS members.

“The definition is important in determining the type of insurance products and services purchased by small business that are eligible for consideration by FOS,” Mr Pettersen said.

In addition, NIBA says an unclear definition of “insurance broker” could carry significant consequences, including much higher claim limits, if professionals such as authorised representatives are bound by terms that appear intended for insurers.

Mr Pettersen says he is concerned “different definitions will apply to members of FOS performing the same insurance intermediary function”.

“This situation is confusing, conflicting and untenable. Clearly a modification to the terms is necessary.”