New rules that require client consent for general insurance commissions could force intermediaries to stop advising on retail products, some brokers have warned.

As insuranceNEWS.com.au has reported, the law – which spun out of the Quality of Advice Review – takes effect on July 10.

General insurance brokers that are providing, or likely to provide, personal advice to retail clients must obtain permission to be paid a commission. Clients’ written consent or a written record of any verbal consent are accepted as proof of permission.

Quality of Advice Review head Michelle Levy told insuranceNEWS.com.au in 2022 that while she backed commissions continuing, the consent requirement would give clients an opportunity to properly consider them.

“It’s not intended to be an onerous obligation, but it is intended to have a conversation and an element of honesty,” she said.

“At least the person has the opportunity to think, ‘Oh, OK, there’s a commission. What does that mean? Do I want to pay a commission? Would I rather pay a fee for service?’ ”

But some brokers say commission is already disclosed to retail clients, and seeking consent will add time, complexity and cost to a stretched process.

“I agree with disclosing our commission (on everything) and also agree with seeking a client’s acceptance to consider our quotation or invitation to renew,” Befor’s Josh Ryan told insuranceNEWS.com.au.

“Adding any more steps where we have to wait for a client to confirm or accept something is going to tip everyone over the edge.

“The biggest problem in our industry at the moment is that the supply chain is so disrupted. We cannot receive responses from insurers fast enough to be able to service clients quick enough.”

Mr Ryan says remuneration for brokers is “quite low” compared with other industries.

“Time is starting to outweigh income,” he said. “Retail products were the first to see commission percentage reductions, which made it harder again.

“If you then look at the amount of claims that are occurring in the property/motor space, it’s becoming uneconomical to manage for most brokers.  

“Brokers are already starting to favour commercial over retail, with a lot of brokers typically carving off [selling] the bottom of their book to focus on the commercial risks.”

AJ Insurance Services MD Joe Daley says retail clients can already “clearly and easily” see broker income on every quote and invoice.

“Gonna need permission to go to the loo from clients soon,” he wrote on LinkedIn. “If retail risks become more difficult and time-consuming, brokers are just going to pull out of that market and leave it to the direct market, because it’s not going to be worth their time.”

Matos Insurance Services director Cory Jellicoe says retail clients accepting the quote “is their consent”.

“Our income is in black and white. Why make this more difficult?”

Other brokers have raised concerns over how to proceed if a client fails to respond to the request for consent.

“Many clients don’t have [time] or want to spend the time on responding to these queries,” GT Insurance Brokers principal Glenn Thomas said.

Clear Insurance MD Lisa Carter told insuranceNEWS.com.au she supports the new law.

“My view is that the intent of this new requirement is to simply protect retail consumers. For advisers, it may add another administrative step. However, this new requirement will ultimately protect all stakeholders in the insurance purchasing process. 

“I’m a strong advocate for a transparent adviser fee remuneration model across all retail and commercial general insurance products.

“The new ... requirement creates minimal disruption to the Clear Insurance business operationally, as we transitioned to a fee-for-service model in 2022.”

Click here for an Australian Securities and Investments Commission information sheet on the new legislation.

What are your thoughts on the new requirements? Email editor@insurancenews.com.au

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