Consumer groups have called for broking code of practice changes to address strata remuneration practices and conflicts of interest.

The Australian Consumers Insurance Lobby, the Owners Corporation Network of Australia and the Unit Owners Association of Queensland say the updated code should provide clear professional guidance.

“There has been extensive scrutiny of strata insurance practices, and the issues are well understood,” unit owners’ association president Mike Murray said.

“For the industry to fail to address them through its own code would be a significant missed opportunity and would further erode consumer confidence.”

The groups have made a submission to the National Insurance Brokers Association as part of its consultations following an independent code review.

They say their concern centres on the interaction between brokers and parties such as strata managers who owe fiduciary duties to insured clients.

“This is a simple issue,” ACIL chair Tyrone Shandiman said. “If it is unlawful for a fiduciary to receive a financial benefit because it conflicts with their duty to the client, then brokers should not be participating in or facilitating that conduct.

“That is not a grey area – it is an unmanageable conflict of interest.”

The groups say Regulatory Guide 181 requires financial services licensees to identify and avoid conflicts of interest that cannot be effectively managed.

“The code should therefore go further and clearly articulate what constitutes an unmanageable conflict in practice, rather than deferring entirely to existing regulatory language,” the submission says.

Consumer groups say they will pursue the matter with the Australian Securities and Investments Commission if NIBA’s response is inadequate.

The move could include asking ASIC to obtain legal advice on the interaction between remuneration practices and fiduciary duties, and seeking further clarification and possibly an RG 181 amendment to explicitly address the issues.

“You cannot ‘manage’ or ‘disclose’ your way out of a conflict that depends on breaching fiduciary duty,” Owners Corporation Network joint MD David Glover said.

“Where these arrangements exist, the only appropriate response is to prohibit them. Consumers should not have to try to work within structures that are fundamentally inconsistent with their interests.”

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