NIBA has indicated in no uncertain terms that the association is strongly opposed to extend the ban on conflicted remuneration to insurance brokers in a submission to ACCC in response to the First Interim Report under the Northern Australian Inquiry.
The document noted that there is no evidence provided in the Interim Report to the effect that ‘unacceptable conflict of interest’ is in fact happening in the delivery of advice, support and services by insurance brokers to their clients across northern Australia.
The peak body for advocating on behalf of brokers also pointed out that that despite being fully within the scope of the Terms of Reference of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, no evidence of misconduct by insurance brokers was provided to the Royal Commission, and there were no case studies demonstrating how insurance broker remuneration structures were leading to undesirable outcomes for clients.
The intermediary association also questioned the fact that the recommendation seeks the abolition of commissions paid to insurance brokers, but is silent on the issue of commissions paid to distributors acting on behalf of insurance companies, especially where it was these distributors who have attracted the attention of ASIC and the Royal Commission for charging excessive commissions and delivering poor client outcomes.
The submission authored by NIBA CEO, Dallas Booth indicates that the association strongly supports the recommendation to ‘abolish stamp duty on home, contents and strata insurance products’, stating, “Policyholders in northern Australia pay double taxation on their insurance premiums – GST and stamp duty. These taxes increase the cost of insurance by around 20 per cent.”
The association also strongly supports the recommendation to to find alternative bases for raising state and territory revenue in a fair and equitable manner across Northern Australia, stating, “NIBA agrees with the findings in the Report that Governments have received and continue to receive windfall gains from the growth of insurance premiums in northern Australia.”
However, the submission categorically conveyed that it is not clear how insurers reporting regularly to ASIC on the brands that they underwrite and in which postcodes new business has been written, will improve the availability and affordability of insurance policies in Northern Australia. The submission states, “NIBA firmly believes that in difficult market circumstances (which includes most product areas in northern Australia) consumers and policyholders should be encouraged to seek advice on the nature and range of insurance available in their area from qualified experts in this field – their local insurance broker.”
NIBA is participating actively in the Treasury review of the standard cover regime under the Insurance Contracts Act and related regulations. The submission points out that it is important to note that while standardization of cover has real benefits in terms of certainty for consumers, consumers and property owners often face differing forms or risk of loss, and it is always important that the insurance markets be able to retain the capacity to provide appropriately tailored cover for the risks being faced by the Australian community. The document also clarifies that it is also important that standardization should not preclude the development of new and innovative forms of insurance cover to better meet the needs of the community.
The submission maintains that there are no apparent benefits likely to be provided by amendments to the Insurance Contract Regulations to require that renewal notices for home, contents and strata insurance clearly disclose the premium, sum insured and any excess of the expiring policy. The documents states, “At the time of renewal, the key question to be considered is the nature of the ongoing risk, and whether the policy continues to be appropriate for coverage of that risk – both in terms of policy terms and conditions and sum insured.”
The association has indicated that it remains willing and ready to assist the ACCC as the inquiry into insurance issues in northern Australia continues.