Royal Commission update for insurance brokers

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia will focus its scrutiny on general insurance next week.

Mark Radford, Principal at Radford Lawyers said on day two of the 2018 NIBA Convention that general insurance brokers were not a major target of the commission but all issues raised will also affect the broader industry including brokers.

He said, “This is a chance for people to have a say, we need to listen and then sift through to the real issues and address those.”

The Commission has been closely watched by many and has attracted heavy media attention. The implications of potential findings for the insurance industry are extensive – particularly for professional indemnity, and directors’ and officers’ insurance.

He said, “NIBA will be all over the hearings, we will distribute the takeaways and learnings for brokers.”

The issues that brokers should be pay attention to are:

  • The issues raised to date and likely issues for insurance round 6 hearings.
  • Design and Distribution reform proposals
  • Unfair contract reform proposals
  • Quality of advice
  • Conflict of interest
  • Remuneration practices
  • Product management issues
  • ASIC Direct Life Review: Key takeaways to be considered in broader context
  • ASIC Funding and its implication on brokers
  • AFCA changes

Radford also clarified, “The hearings could result in a reduction of distribution partners (like travel agents) for insurance and that is good news for brokers.”

Following the Commission there is the potential for civil class actions, proceedings for civil penalties and criminal prosecutions. These actions might be brought against companies and individuals.

Media have reported on whether the Commission might result in increased insurance premiums, more intense focus on underwriting discipline and the tightening of the scope of policy coverage.

The interim report from the commission is due at the end of this month and the final report is due February 2019. Radford believes that we as an industry will be hit in the final report.