Senate inquiry into consumer protection in insurance

The National Insurance Brokers Association of Australia (NIBA) has made a submission to the senate in response to the Government’s Inquiry into consumer protection in the banking, insurance and financial services.

On 29 November 2016, the Senate referred an inquiry into the regulatory framework for the protection of consumers, including small businesses, in the banking, insurance and financial services sector (including Managed Investment Schemes) to the Senate Economics References Committee for inquiry and report.

The submission stresses the role of insurance brokers as consumer advocates and the many benefits they offer to customers. In limited cases, the insurance broker may act as agent of the insurer not the insured, but where such a relationship exists the customer is clearly advised up front. This is a key requirement of the Insurance Brokers Code of Practice.

It has been stated in the submission that Australia has been well served by insurance brokers who provide significantly different services to those involved in the investment and superannuation industries.

NIBA believes it is important, in developing any legislation and reform proposals, to consider up front whether there is any detriment that needs addressing, rather than catching all and after the fact seeking to carve out those who are in reality not the focus of the change.

It submission makes it clear that there is little if any evidence of any significant impact of misconduct in this sector on victims and on consumers, which is shown in the low numbers of:
o Financial Ombudsman Service Limited (FOS) disputes;
o Insurance Brokers Code of Practice complaints;
o ASIC actions against insurance brokers; and
o litigation involving insurance brokers.

The current law applicable to insurance brokers is working effectively to avoid or properly manage any risks associated with executive and non-executive remuneration, incentive-based commission structures, and fee-for-no-service or recurring fee structures. There is no evidence of these being issues of concern in relation to insurance brokers.

You can view the submission on the NIBA website.