The National Insurance Brokers Association (NIBA) rejects ASIC’s call for a ban on general insurance commissions.
As reported in Australian Financial Review, ASIC has lodged a submission to the Royal Commission calling for the banning of all commissions (more correctly “conflicted remuneration”) in general insurance.
The ASIC submission makes a number of statements about the harm caused by “conflicted remuneration” “across a wide range of retain financial services”. The ASIC submission goes on to argue that “the negotiation, payment and acceptance of conflicted remuneration has contributed to poor consumer outcomes, such as sales of products with little or no value to consumers, or which do not meet consumer needs”.
The ASIC submission gives no basis for the existence of poor consumer outcomes where insurance brokers are acting for and on behalf of their clients. Their main concern appears to be in the area of motor vehicle add-on products, where changes to business models are being implemented in any event.
NIBA CEO Dallas Booth says, “The NIBA submission to the Royal Commission explains at some length the lack of evidence to justify changes to remuneration arrangements for insurance brokers. Our submission discusses the value borkers provide to their clients, and the very low numbers of complaints and disputes against insurance brokers. We will continue to argue these points, to the Royal Commission, to Treasury, to Government Ministers and to Shadow Ministers.”
The NIBA submission notes that there has been no instances mentioned at the Royal Commission of serious or systemic misconduct by general insurance brokers, leading to poor client outcomes or detriment to consumers. Indeed, the submission is able to point out the very low numbers of complaints against insurance brokers to the Financial Ombudsman Service or the Insurance Brokers Code of Practice Code Compliance Committee. Further, Booth stresses that NIBA’s discussions with ASIC and other government agencies have not indicated issues or concerns with the nature or quality of advice and support provided by insurance brokers.
For these reasons, the NIBA submission argues strongly that existing arrangements for the regulation of remuneration of insurance brokers acting for and on behalf of their clients are adequate and appropriate, and there is no basis or justification for any change to those arrangements. The submission also outlines an extensive range of issues and concerns that are likely to arise if the current remuneration framework is changed in a significant manner, including negative impacts on clients and consumers.
NIBA has indicated that they will continue to closely monitor developments around this issue and keep Members informed of developments as they occur.