The Australian Consumers Insurance Lobby warns a softening market may lead some brokers to alter their commissions without proper disclosure and informed consent from clients. 

Lobby chair Tyrone Shandiman says in previous soft market cycles, there have been examples “where brokers negotiated 20% premium reductions but failed to pass those savings on” to clients.

“Instead, they increased commissions on top of prior fee-for-service models, leaving clients significantly worse off without proper disclosure.

“This conduct has even occurred with large, sophisticated clients such as high-rise buildings, showing that the industry’s assumption that wholesale clients do not require disclosure is dangerously misplaced.” 

ACIL says it has asked regulators – including the Australian Securities and Investments Commission – and the Insurance Brokers Code Compliance Committee to watch out for such “unscrupulous” conduct.

“Brokers, as licensees under an Australian financial services licence, are required to act efficiently, honestly and fairly,” ACIL said. “Changing remuneration models during periods of premium reductions without transparent disclosure may contravene these core obligations.”

Mr Shandiman added: “At a minimum, brokers must be upfront with clients when changing remuneration structures – especially where the benefit flows to the broker at the client’s expense.

“That means ensuring clients are properly informed and their consent is genuinely obtained. If current remuneration models are, as the industry claims, the right and fair way for brokers to be paid, then there should be no issue prominently displaying this information to clients.

“Concealing it doesn’t just undermine trust — it damages the professional image of the entire broking industry and reinforces negative perceptions about a lack of transparency.”