ASIC’s recent banning of a NSW insurance broker from the industry for life highlights a new issue, says NIBA’s legal counsel.
Last month, Isaac Hakim was permanently banned from providing financial services after misconduct regarding broker fees.
Radford Lawyers Principal Mark Radford says it is rare for insurance brokers to be subject to ASIC scrutiny but when they are it is usually in relation to misappropriation of client funds.
“The consumer impact is limited in such cases as receipt by the insurance broker is deemed receipt by the insurer so the client is generally not adversely affected,” he says.
However, this was not so in Hakim’s case, in which an ASIC investigation found that between 2004 and 2013 Hakim’s firm, Leedam, had engaged in misleading and deceptive conduct in relation to the fees it charged.
“On seven occasions, Mr Hakim caused false invoices to be created and sent to clients. The invoices overstated the insurance premium being charged to the client and understated the broker fee being charged by Leedam,” Radford says.
“This gave clients the impression that they were being charged a lower broker fee than was actually the case. In addition, on numerous occasions Leedam charged its clients broker fees in excess of those disclosed in its financial services guides (FSGs).
“Leedam also charged clients broker fees in circumstances where it had received a commission payment from the insurer, contrary to statements in the FSGs. Those excess fees totalled more than $3m.”