‘We’re not afraid of transparency’: AUB, PSC back code reversal
Listed brokers AUB Group and PSC have set out their position on the revised Insurance Brokers Code of Practice, arguing that the previous version would have been “impractical”.
As reported, the National Insurance Brokers Association (NIBA) code was republished on November 1 after a requirement to disclose remuneration, including commissions, to small businesses was removed.
The earlier version of the 2022 code required brokers to disclose commission to all individual or small business clients, but the latest change restricts the requirement to retail clients purchasing defined general insurance products, as outlined in the Corporations Act.
Quality of Advice Reviewer Michelle Levy, consumer groups, industry expert John Trowbridge, and Insurance Brokers Code Compliance Committee Chairman Oscar Shub have all criticised the removal of the requirement to disclose remuneration to small businesses, with Mr Shub saying he is “deeply concerned”.
On Thursday, insuranceNEWS.com.au published comments from Steadfast CEO Robert Kelly, who said Steadfast has its own code that goes further, and that the previous version of the NIBA code “was the correct one”, from the consumer’s perspective.
Mr Kelly said some brokers are against transparency because they do not want their clients to know how much they earn. He also said some NIBA members threatened to leave and set up a rival association if the reference to small businesses remained in the code.
AUB and PSC say that they were proponents of reverting to the code as it now stands, but not because of fear of disclosing commissions to small business clients. They say if customers ask their brokers for more detail on remuneration, it is always provided.
Both companies say the previous version of the code would not have worked, due to the way small business is defined in law as a firm with fewer than 20 employees, or fewer than 100 employees if it is in manufacturing.
They say that would have meant collecting and processing new data, and the cost of this would be passed to clients with little benefit.
They also say that while discussions were held about the future of NIBA, this was in relation to a broader range of issues.
“Where we landed on transparency was obviously a wrestle, largely as a result of all the practical issues,” PSC MD Tony Robinson told insuranceNEWS.com.au.
“But where NIBA got to, with universal support, was that the client outcome is the principal focus, and the code is written to achieve that and to help drive that outcome.”
He says PSC would be open to other ways to ensure disclosure is required for unsophisticated small businesses, but that this would be more consistent if was set out by government or regulatory bodies.
“It would be great if you could say, ‘any policy under $5000, there should be commission disclosure’. If the government has got a concern about this issue, they will address it in a sensible way. If it’s needed, they’ll do something like defining bizpack as a retail product.
“There are alternative solutions that are available to other parties that can address the point.
“In the meantime, we needed to find a practical outcome, and the practical outcome is one that everyone supported, which is that retail products need to be disclosed.
“Transparency is good for everyone. The question is how much you legislate or mandate it – because it always comes at a cost.”
AUB Group CEO and MD Mike Emmett says the revised version of the code is “much more appropriate and manageable”.
“We don’t collect details about how many staff our clients employ. So there is a whole lot of unhelpful data you have got to collect, for what we thought was a spurious purpose.”
While Mr Emmett agrees “less sophisticated” clients deserve full disclosure, he says declaring commissions on all accounts is not the answer as it would lead to a “race to the bottom” where less able brokers could easily poach clients by offering cut-price deals.