The Insurance Brokers Code Compliance Committee will review conflicts management and communications standards after breaches were highlighted in its latest data report.

The conflicts review will include examining how brokers show evidence of client understanding around terms of engagement.

Brokers reported 480 breaches of the code commitment to provide clients with written terms of engagement last year, up 65% on the previous period, the committee’s annual compliance run-down shows.

The figure amounted to 9% of all code breaches, and 582 clients were affected.

Common failings included missing or inadequate disclosures relating to conflicts of interest and how they are managed; remuneration and other benefits; the broker’s capacity or role; and code references.

The breach report, released this week, says terms of engagement are a key protection and disclosure is particularly important when a broker may not be acting exclusively on behalf of the client.

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“Brokers should regularly review and update their engagement documentation to ensure it is current, complete, compliant with the code and clearly explains the broker’s role, advice type, remuneration, conflicts and capacity, including in relation to claims management,” the committee said.

The committee has also encouraged brokers to review their communications, to ensure they are clear and in line with expectations.

Breaches of two code communications clauses numbered 993, down 26% from the previous year. They accounted for 18% of all breaches.

The clauses call for brokers to communicate in a timely and clear manner and to ensure clients understand advice provided.

Failure to contact clients at least 14 days before policy renewal accounted for 38% of all code of practice breaches, and brokers have been encouraged to adopt recommendations in the compliance committee’s good practice guidance.

The overall number of breaches fell 2% to 5417. They affected 14,842 clients, down 52% on the previous year. Complaints were up 8% to 3133.

The report shows 62% of brokers reported breaches, up from 58%, which the National Insurance Brokers Association says reflects a strengthening of compliance frameworks and oversight, and a willingness to identify, report and address breaches.

NIBA says it will engage with the communications and conflicts management reviews to ensure members are well placed to meet evolving expectations.

See the report here.

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