Brokers are bracing for potentially huge changes to their advisory models as the Federal Government prepares to consult on a key Quality of Advice Review (QAR) proposal: expanding the definition of personal advice. 

The National Insurance Brokers Association (NIBA) says the proposed measure and other QAR recommendations that the Government has earmarked for further consultation “will have a significant impact on brokers and the way they provide advice to their clients”. The Government has grouped these proposals under Exploring New Channels for Advice as part of its response to the QAR report.

The consultation, announced this week in the Government’s three-stage response to the QAR final report, will also cover Reviewer Michelle Levy’s recommendations to remove the general advice warning and create a new good advice duty to replace the existing best interests duty and related obligations. 

“NIBA will be working closely with government over the coming months to deliver a positive outcome for members,” the peak body said. 

The Albanese Government on Tuesday finally responded to Ms Levy’s final report, which she submitted in December, agreeing to take up “in full or in principle” 14 of 22 proposals including keeping the commissions remuneration model and permitting super funds to provide personalised retirement advice. 

NIBA says the commissions decision “is a significant win for insurance brokers and their clients and NIBA welcomes the Government’s support for this recommendation”. 

Financial Services Minister Stephen Jones says his approach is “to sort between the urgent and the important” and has therefore grouped the QAR proposals into three stages. 

Proposals around broadening the definition of personal advice and creation of a good advice duty come under the third stage’s Exploring New Channels for Advice. 

“Government consultation will test how these proposals might operate under different advice models, including digital advice models, and across sectors,” Treasury says in a statement in reference to the third stage.

“Consultation will also consider practical policy design and implementation issues, including in relation to consumer protections.” 

Mr Jones says the final stage “will examine the role for other institutions – banks and insurers – in providing more information and advice”. The Government expects to finalise its position on the remaining proposals before the end of the year. 

Radford Lawyers Principal Mark Radford says potential changes around personal advice is a key area that general insurance brokers should pay close attention to, as the Government prepares to consult on Ms Levy’s proposal to broaden its definition. 

“The key is who is going to be providing personal advice or not in the new world as right now brokers are the ones that are usually giving personal advice, not insurers,” Mr Radford told insuranceNEWS.com.au. 

Ms Levy in her final report proposed broadening the definition of personal advice so that it captures a “wider category of financial product advice” and describes it as “the foundation” of her other recommendations. 

“It will contribute to better quality advice, not poorer quality advice,” she said in her report. “In doing so, the recommendation will address one of the great mischiefs of the existing regime – it will stop providers giving general advice in circumstances where customers want and expect personal advice.” 

Mr Radford says the QAR’s proposed definition of personal advice “is extremely broad and could catch many persons that currently only provide general advice”. 

“Whilst brokers already provide personal advice, some may only provide general advice for certain product types,” said Mr Radford, who has more than 25 years’ experience advising the insurance industry including brokers. 

He says brokers may need to adapt their existing business models based on the final definition – if the Government decides to take it up – so it is crucial to get it right. 

"Currently most insurers and agencies avoid providing any personal advice. If they do decide it’s a good idea to provide personal advice under the new definition, they may end up competing with brokers," he said.