The broking code of practice must clearly define “unmanageable conflict of interest” and should expand commission disclosure requirements, a consumer group says.

Without a clear standard for unmanageable conflicts, compliance is subjective and inconsistently applied, the Australian Consumers Insurance Lobby says in a submission to the independent code review.

The code should also explicitly prohibit remuneration practices that create unmanageable conflicts of interest, going beyond current wording that only requires brokers to review their models, it proposes.

“If brokers are to maintain their professional standing and retain public confidence, the code must go beyond vague commitments and introduce concrete provisions that prioritise the best interests of clients, eliminate unmanageable conflicts of interest, and ensure full transparency in remuneration and appointment practices,” ACIL says.

The National Insurance Brokers Association has appointed Phil Khoury to lead the review of the 2022 code, with submissions due by May 2.

ACIL makes recommendations on remuneration structures that exceed standard industry levels, and highlights problems where strata managers appoint brokers without obtaining authority from owners’ corporations.

“This is a systemic issue that enables conflicts of interest and breaches fiduciary duties. The code should require brokers to take reasonable steps to confirm their appointment is valid and authorised by the insured.”

It says brokers should be made to disclose changes to their remuneration models from previous years, particularly when they affect consumers, and provide clarity on opaque business structures.

ACIL says the code should standardise remuneration disclosure requirements across wholesale and retail clients alike.

“If commissions are truly the appropriate way to remunerate brokers, as claimed by NIBA, then there should be no hesitation in placing them on page one of the proposal in bold,” it says.

The Insurance Council of Australia’s submission says it would welcome stronger provisions around managing potential or perceived conflicts of interest.

It recommends considering more pay and commission transparency, “such as for wholesale clients”, and proposes the code update reflect a regulation starting in July that requires intermediaries to obtain the consent of retail clients before receiving commissions.

Public submissions can be accessed here.