Brokers are different: NIBA cautions against 'broad-brush' advice review

The National Insurance Brokers Association (NIBA) says the Quality of Advice Review provides an opportunity to “reset”, but has stopped short of giving its full support for the proposals paper made by Reviewer Michelle Levy.

NIBA says a number of the recommendations, including proposed changes to general and personal advice, appear to have been written with financial advisers in mind.

The insurance brokers’ peak body says issues arising in advice relating to general insurance products can differ from those concerning life risk insurance, investments, and superannuation.

“Further clarification would be required to ensure the proposals are appropriate for the general risk advice sector,” NIBA says.

“In particular, NIBA expressed concerns about how advisers will be judged to have provided ‘good advice’ where a policy contains exclusions that may later be relied upon by the insurer to deny a claim.”

Ms Levy in her proposals paper recommended replacing the existing “best interest” duty with the obligation to merely provide “good advice”, which she defines as advice that would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided.

She also proposed regulating the provision of personal advice and suggested general advice should no longer be regulated as a financial service. The definition of general advice should also be removed together with the obligation to give a general advice warning.

Ms Levy says the proposed changes are aimed at easing brokers’ regulatory burden and also to allow advice providers to give better guidance to clients.

But NIBA cautions in its submission against adopting a “broad brush” approach as financial advice are provided in different forms.

“As evidenced throughout this submission, the types of advice that are provided under the umbrella of financial advice vary significantly,” the submission says.

“It is these differences that makes regulation of financial advice as a homogenous industry so difficult.

“NIBA encourages the review to consider these different types of advice in their own right rather than apply a broad brush to all providers of advice.”

The broking body says the reality of insurance is that a product may not meet all client needs due to a variety of reasons, including policy exclusions, budgetary limitations or market availability.

“Recommending a general insurance product can involve advice on the most appropriate product for the customer, which may not meet all needs but is the most appropriate having regard to the overall consideration of the client’s needs, objectives, and financial situation,” the submission says.

NIBA says the current distinction between personal advice and general advice remains valid, and the distinction should apply regardless of the type of personal advice being provided.

It also strongly believes that all forms of risk advice should be regulated regardless of whether it is provided under a personal advice or general advice model so as to ensure consumer protection.

“Both general advice and personal advice models present several dangers to clients if not properly regulated,” its submission says.

“In regard to the extent of the regulation of different types of advice, NIBA believes that all advice should be regulated to the extent that it provides adequate protection to consumers.”

Click here for the submission.