The updated broking code of practice should adopt the Australian Financial Complaints Authority’s broader definition of small business, the ombudsman service proposes. 

“Consistency in the definitions for the purposes of the code and [external dispute resolution] would reduce complexity for brokers and small businesses,” the authority says in a submission to the code review. 

AFCA – which describes small businesses as those with fewer than 100 employees – says the code’s definition is relatively narrow, and an independent review of the general insurance code has also proposed using the ombudsman’s wording. 

The submission also says the remuneration disclosure requirement in section 6.1 (a) of the code does not benefit all small business clients and exclusions should be removed to give equivalent protection.

“In broad terms, small businesses have as much need for protection in financial matters as individuals,” it says. 

AFCA calls for clear time frames on claims management, including that a broker should provide updates on progress every 20 business days and notify a client of an insurer’s response to a claim within 10 business days.  

It recommends that the National Insurance Brokers Association should submit the updated code to the Australian Securities and Investments Commission for approval. 

The Australian Small Business and Family Enterprise Ombudsman also backs submitting the document to ASIC and adopting the AFCA small business definition, with a decoupling from the retail and wholesale client division in the Corporations Act. 

“The code should provide the same degree of disclosure, protection and support to all small business clients, many of whom lack the time, resources or expertise to explore or negotiate appropriate insurance coverage at a competitive price,” it says.

Stronger informed consent requirements should include all non-pecuniary benefits, while any benefits from related-party transactions or relationships should be disclosed, and brokers should have to justify recommending fewer than three product options, the submission proposes. 

The small business service says the code could be improved by specifying measurable time frames and actions for commitments and obligations, rather than relying on vague criteria such as “timely”, “reasonable steps”, “as soon as practical” or “reasonably practical”. 

The document’s guiding principles should be advancing the interests of clients, including small businesses, and committing members to acting honestly, fairly and with integrity, it says. 

“A study by Vero Insurance highlighted that businesses rely on brokers to gain expert knowledge of policies, a deep understanding of their business needs and help when processing claims. 

“The current version of the code gives the impression that the insurance broker is a helpful bystander, rather than an active agent for customers and small businesses.”