Recent regulatory changes signal heightened attention on conflicts of interest and remuneration, according to Curium.

The compliance insurtech says many companies in the insurance sector are tied – for example by common directors or shareholdings – and this may breach the new Regulatory Guide 181 if not managed correctly.  

The guide outlines how financial services companies should identify and manage conflicts of interest.

There are also a range of reforms on conflicted remuneration that can affect insurance brokers, effectively banning most monetary and non-monetary incentives.

“The changes went into effect in July last year and we have seen almost no action or changes in remuneration practices,” Curium CEO and co-founder Tetiana George told insuranceNEWS.com.au. “SMEs especially are not even aware of the changes.

“Last year was quite heavy in regulatory change – this might have been one of the blind spots.”

Ms George says many insurance businesses do not disclose the conflict properly, or manage it by removing the conflicted party or refusing a transaction.  

“ASIC is signalling that this will not be enough, but as of now we don’t see enough movement and changes. What’s changing is how clearly firms are expected to manage conflicts of interest in practice – not just describe them in a policy.”

Company policies need to demonstrate practical ways to identify conflicts, clear steps for managing or escalating them, and rules for when a business should step back and not act.

“Policies should draw a clear line. Staff should not be left guessing,” Curium said, adding a  strong policy helps staff understand how best interests are weighed when conflicts arise, and what happens when commercial interests point in a different direction.

The Sydney-based insurtech recommends stronger treatment of remuneration, gifts and benefits.

“Commissions, non-monetary benefits and gifts are some of the highest-risk conflict areas, yet they are often underexplained. Good policies address these topics together, deal with frequency and perception, not just dollar amounts, and require recording and monitoring over time.”Policies should also clearly state who makes decisions when conflicts are complex or sensitive.

See Curium’s guide to the changes here.