The broking code compliance committee has warned the continued legitimacy of self-regulation depends on the industry’s willingness to ensure its code of practice is an effective tool for consumer protection and accountability.

“A code that is reluctant to evolve, or sets only the minimum standards acceptable to subscribers, risks undermining confidence in the self-regulatory model,” the committee says in a submission on the redrafted code of practice.

Calls for greater legislative and regulatory intervention are likely to increase if confidence is lost, leading to outcomes unlikely to serve consumers or industry as effectively as a strong, credible and continually improving code, it says.

The compliance committee is pushing for inclusion of an independent reviewer’s recommendation for signatories to provide all individual and small business clients with remuneration disclosure regardless of product.

Proactive disclosure has been extended to residential and commercial strata, but the committee says the National Insurance Brokers Association needs to go further and include small business clients.

The submission describes remuneration disclosure as one of the most significant issues in the code and says transparency is fundamental to informed decision-making, effective management of conflicts of interest and confidence in the insurance broking profession.

Related article: ‘Why are brokers afraid of disclosing remuneration?’ asks code compliance chief

A clause providing a request-based approach to broking remuneration arrangements does not provide meaningful transparency, while high trust levels among existing clients is not an argument against greater disclosure, it says.

“Requiring clients to ask for remuneration information assumes they know the information is available, understand why it may be relevant and feel comfortable requesting it,” the submission says.

The committee acknowledges findings from the NIBA report Complexity to Clarity that highlight the value brokers provide and the level of trust and satisfaction reported by clients.

But it says that research does not provide a sound basis for limiting proactive disclosure.

“Evidence that existing clients value and trust their brokers is not an argument against greater transparency,” it says.

The committee says the draft code includes several positive reforms, including stronger provisions on vulnerability, family violence, records management, complaints handling, catastrophe support and breach reporting.

“Despite these improvements, significant issues remain in critical areas. Further changes are needed to strengthen client protections, improve the clarity and enforceability of the code, support effective compliance monitoring and maintain the credibility of the self-regulatory framework.”

As insuranceNEWS.com.au has reported, NIBA says arguments for expanding the code are based on principle and not demonstrated harm.

Click here to read the full code compliance committee submission.