IT challenges delay key code section's implementation
The “disclosing remuneration” section of the National Insurance Brokers Association’s (NIBA) new code of practice will take effect a year later than expected after members raised implementation concerns.
NIBA advised members yesterday that Section 6.1 would now take effect from November 1 next year after it became apparent during discussions with brokers and their IT providers that some changes couldn’t be made in time.
All other sections of the code, which was launched at the start of March, will come into effect as scheduled on November 1 this year.
As reported yesterday, the disclosure section has met strong resistance from a number of prominent national brokerages. However, NIBA CEO Phil Kewin says he expects the delayed disclosure section will still come into force next year in its present form.
He told insuranceNEWS.com.au the timeframe for making the required process and system changes had proved “ambitious” for the new disclosure requirements. He says the code was released later than expected and the issues had become more obvious as the deadline became a reality.
“In hindsight it was probably too ambitious,” he said. “There is usually a two-year transition for something like this, so we are still doing it in a shorter period of time than that.”
There has been considerable debate within broking circles about the code’s definition of “small business”. Section 6.1 says a small business is one that “is or includes the manufacture of goods and employs less than 100 people”, or otherwise employs less than 20 people.
On disclosing remuneration, the section says that “if a client is an individual or a small business and we [brokers] are acting on their behalf, we will provide them with information about any remuneration (including commissions) or other benefits we will or expect to receive as a result of providing covered services”.
The section says the disclosed information provided must include the dollar amount of commission the broker will or expects to receive, any non-monetary remunerations, any fees payable by the client and whether the broker intends to keep any portion of the commission or service fee if the policy is cancelled before it is due to expire.
Treasury is currently looking at issues including disclosure and remuneration as part of its Quality of Advice review. An issues paper was released for feedback in March and a report is due to be handed to the Federal Government by December 16.
In the note to brokers, Mr Kewin thanks members for the support they have shown for the new code.
“Self-regulation is a privilege, not a right, a privilege that brokers have earned through the demonstration of their commitment to professionalism and ethical behaviour,” he says.
“The 2022 Insurance Brokers Code of Practice demonstrates this commitment to clients, regulators and the broader community and forms an important part of NIBA’s response to the Treasury’s Quality of Advice review.”
The Financial Rights Legal Centre says its disappointing to see brokers delaying the critical new commitment to transparency in disclosing remuneration details.
“Brokers have had long enough to understand these new requirements were coming – even now they still have four months – and to delay this for an extra year amounting to 18 months from the original announcement to sort out their IT systems is unreasonable. Consumers deserve better than this,” Acting Director of Casework Jane Foley told insuranceNEWS.com.au.
“This delay is not great look just as the Quality of Advice review is proceeding.”
