Industry expert John Trowbridge says brokers should disclose commissions to all clients, arguing limitations in the new draft code of practice reflect “broker self-interest”.

His comments come as three consumer groups today said they will “walk away” from code consultations, which end on August 7.

As previously reported, the National Insurance Brokers Association has changed tack on a key recommendation from the independent code reviewer. It said in January it would widen remuneration disclosure requirements for all small business clients, regardless of product, but this change did not make it into the draft code, published last week.

Mr Trowbridge has provided a detailed submission, seen by insuranceNEWS.com.au, highlighting “material shortcomings”.

He welcomes disclosure enhancements for strata customers, but argues there are other gaps. He says there is no guidance for brokers or clients on what represents a conflict of interest, and “the absence of any recognition that commissions represent a conflict of interest is ... a major deficiency”.

Mr Trowbridge says section 7.1 of the code is “deficient” and disclosure of remuneration should apply to all clients “irrespective of type of product or type of client”. He has previously presented the same argument to the Tasmanian government as part of his work on the TasInsure project.

“There appears to be no good reason for [the limitations in the code] beyond broker self-interest,” he writes.

Related article: Broker code committee slams NIBA U-turn

Meanwhile, the Australian Consumers Insurance Lobby, Owners Corporation Network and Unit Owners Association of Queensland today announced they will abandon dialogue with NIBA on the code.

They say the draft document “demonstrates that meaningful reform of the strata insurance sector will not come through industry self-regulation”, and the groups will now focus on engaging with the corporate regulator and governments on reform.

“A professional code should lead the industry,” OCN co-MD David Glover said. “It should set higher standards than the law and give consumers confidence that difficult issues are being addressed.

“Instead, we’ve seen superficial tinkering while the key issues that have undermined trust in the strata insurance sector aren’t even touched. Consumers deserve a code that addresses the causes of distrust, not just its symptoms.”

The groups welcome the expansion of remuneration disclosure requirements for strata customers but say a range of other potential improvements have been ignored.

Their recommendations included a ban on brokers making payments to strata managers, a requirement to disclose commercial relationships, and a requirement to justify remuneration that exceeds industry norms.

NIBA says that, following extensive consultation, it believes the proposed new code delivers improvements and is fit for purpose.

It has yet to respond publicly to criticism of the draft code.