Too many brokers fail to disclose conflicts or support clients at claim time, financial counsellors from two states say.

Financial Counselling Victoria and the Financial Counsellors’ Association of WA have made 15 recommendations in a joint submission to the broking code review.

They include adding a code clause requiring “minimum standards of due diligence by brokers to understand client requirements”.  

The groups also want “enforceable professional and financial sanctions for brokers who breach the code, ensuring penalties are substantial enough to impact profitability and drive genuine compliance across the industry”.

The associations flag “alarming” evidence of insurance brokers “actively discouraging” clients from engaging with independent financial counsellors “while simultaneously failing in their duty to support with claims”.

The submission says: “There are insurance brokers who are clearly not working in their clients’ best interests, who are providing uninformed advice, are not disclosing any conflicts, and who then fail to support clients when a claim needs to be made.”

In one example given, a regional Victoria small business owner transferred premiums to a broker – also a friend – after she bought property. She saw no written advice or documentation relating to the policy, the submission says. When the property flooded, she asked the broker to claim on her behalf and he assured her he had the situation under control, but six months later there was no evidence a claim had been lodged.

A financial counsellor discovered the broker had arranged farm insurance, leaving the woman unable to make a claim. The counsellor also found evidence of poor practices with other clients.  

“Trusting in the broker due to tight relationships in a small community, clients will move ahead with the recommendation without written documentation and purchase an insurance product that may not be right or the best fit, or the best value for their circumstances,” the submission says.

It recommends that the code require provision of detailed statements of advice and that brokers act within set time frames “rather than the current vague reference to ‘in a timely manner’ ”.

It says the complaints process must be made more transparent, independent and client-friendly, with complaints not handled by the broker involved, to “remove any real or perceived bias and encourage fair assessment”.  

Clients should receive clear information about their rights and how to raise concerns from the outset of the broker relationship.

The associations also want authorised representatives registered individually with the Australian Financial Complaints Authority.

Currently, they say, clients are left “in a dead end” and unable to escalate complaints through formal, independent channels “unless the broker’s parent company chooses to co-operate”.  

“Combined with an inadequate or biased internal dispute resolution process, clients are left with no confidence that complaints will be resolved fairly,” they say.

“This change would provide clients with a clear, consistent avenue for redress and would place accountability where it belongs: on the individuals providing advice rather than a parent firm at arm’s length to the matter.”  

See the submission here.