The disputes ombudsman has raised concerns over “significant gaps” in broker and insurer code of practice redrafts with Assistant Treasurer Daniel Mulino and a parliamentary inquiry. 

The Australian Financial Complaints Authority (AFCA) says the protection gaps for small businesses purchasing cover have been raised in independent code reviews and through its own feedback. 

“To date, each of the code owners - the National Insurance Brokers Association (NIBA) and the Insurance Council of Australia (ICA) - have failed to respond effectively,” chief ombudsman David Locke says in a submission to the small business insurance inquiry. 

“Absent more robust responses from the sectors, we consider legislative intervention may be necessary.” 

AFCA says it would welcome the opportunity to discuss the issues with the Joint Committee on Corporations and Financial Services, which will deliver its small business insurance inquiry report on October 27, and has separately raised the matters with Dr Mulino. 

Despite continuing calls to amend the broker code to require remuneration disclosure for all policies for any product and to any client, NIBA continues to side-step the issue, AFCA says. 

“It raises broader questions about the effectiveness of self-regulation where well-identified consumer protection concerns remain unresolved despite repeated review processes and clear recommendations for change.”  

AFCA says the general insurance code redraft fails to implement review recommendations for all of the document to apply to small business, with the sector definition aligning with ombudsman rules, and legislative retail and wholesale client or product distinctions removed. 

The ombudsman says small businesses within its jurisdiction should receive the same code protections regardless of how their insurance product is classified. 

It notes NIBA’s insurer code submission advocates for extensions to protections for small business, and for key commercial covers to remain within the document. 

“We consider it to be an unacceptable outcome for NIBA to advocate small business enhancements in the GI Code while refusing to progress these same changes to NIBA’s own code,” Mr Locke says. 

AFCA and the Insurance Brokers Code Compliance Committee both lodged late submissions with the inquiry. 

IBCCC chairman Oscar Shub says NIBA is yet to make its final decision on the code and still has an opportunity to address the remuneration disclosure issue through self-regulation. 

If a change is not made, the IBCCC recommends the inquiry committee “consider legislative or regulatory reform to ensure consistent disclosure protections for small business clients.”

Access the submissions here.