Earlier this month, the National Insurance Brokers Association (NIBA) announced Phil Khoury, principal of specialist consulting firm, Cameron Ralph Khoury, as the independent reviewer for the Insurance Brokers Code of Practice review.
The review of the 2022 Code is expected to officially get underway in the New Year. The document is one of the most, if not the most, important governance and practice guides for insurance brokers.
“The Insurance Brokers Code of Practice underlines our ongoing commitment as a profession towards self-regulation, helping ensure that insurance brokers can continue supporting Australian families, communities and businesses as trusted partners to manage risk and thrive,” said NIBA CEO Richard Klipin in a media release announcing Khoury’s appointment.
Another important independent stakeholder in the review process is the Insurance Brokers Code Compliance Committee (IBCCC). Insurance Business asked the IBCCC’s chair, Oscar Shub (pictured above) how the Code review is looking at this early stage?
“The review completion is scheduled for the end of 2025 and NIBA is planning to ensure that happens,” said Shub. “They're not talking about delays.”
He said the IBCCC’s priority areas for the review are currently transparency, conflicts of interest and vulnerable clients.
“We believe that transparency should be absolute,” he said.
The IBCCC was not pleased with this modified version.
“We've been asked many times, why do we only talk about transparency for retail customers?” said Shub. “The answer is relatively simple.”
The IBCCC chair said wholesale clients don’t have the same transparency issues.
“Some of the major [wholesale] clients of brokers have got their own structures in place,” said Shub. “They're dealing with them directly and they’re working with them on contractual arrangements so there's much more interaction between them and the brokers.”
However, he said the IBCCC would also welcome greater transparency for wholesale clients too.
“There is transparency for retail clients and small to medium enterprises regarding a list of insurance policy types in legislation,” he said. “But that, in our view, isn't sufficient.”
Shub said, in the IBCCC’s view, there is no difference between an insured person, either a small to medium enterprise or a private client, buying a policy to cover their home or buying a more commercial policy like business interruption.
“So that will definitely be an area of our concentration,” he said.
Another area of focus, he said, would be potential conflicts of interest between a broker and an insured person.
“Those situations can arise where a broker has some kind of connection with an insurer and they have to be representing the interests of the client,” said Shub.
IB asked if this concern is focused on the strata sector or a more general broking issue?
“I would say it's more general than that because it was certainly an area for our concentration even before the whole strata blow-up,” said Shub.
“However, strata is very much an area of concern for conflicts,” he said. “If you've got a broker working with a strata manager and the broker and the strata manager are arranging fees and commissions there is a potential for conflict.”
The IBCCC chair said that, while the Australian Financial Complaints Authority (AFCA) does not have jurisdiction over strata managers, there is an obligation for a broker who is a member of NIBA under the Code.
“Then we would be looking at that to see that conflicts don't exist,” he said. “Or, alternatively, if they do exist, can they be dealt with appropriately to avoid the conflict being to the detriment of the insured?”
IB asked if the IBCCC would be recommending changes to the Code to deal with this issue?
“We'll certainly look at that,” said Shub.
The third important issue the IBCCC wants addressed is vulnerable clients.
“Vulnerability can be all sorts of things,” said Shub. “It can be lack of communication, it can be distance, or any number of things where a client needs more attention.”
The IBCCC chair said other issues could emerge once the independent reviewer begins work.
Shub said lessons were learnt from the last review of the Code that led to the 2022 version.
He said that was a “a much slower process” and one lesson was the need for a wider consultation process.
Shub said, this time, there’s “a strong intention” to involve a wide range of insurance stakeholders apart from NIBA, including community groups.
“That was a good lesson learned,” he said.
Another industry concern - but one that’s not directly part of the Code review – is breach reporting.
The IBCCC says only about 63% of brokers report breaches. That number is worse than it looks because, says the IBCCC, “many brokers continue to submit incomplete, inaccurate, or inconsistent compliance data.”
“We are working on it,” said Shub. “We'd like it to be better but it's shown improvement.”
He said the IBCCC is working directly with brokers on this.
“We make it very clear at every opportunity how important breach reporting or complaints reporting is because not only does it indicate where people are doing something wrong, but it operates as a learning process for the whole industry,” said Shub.
The NIBA release said Khoury is a respected expert in governance, regulatory practice and industry codes.
Khoury seems to be looking forward to his role.
“The review is critical to ensuring that the Code remains relevant, effective, and responsive to the needs of all stakeholders,” he said.
Shub said he hasn’t met Khoury yet but expected that to happen in the weeks ahead.
Are you an insurance broker? What issues would you like to see addressed in the Code review? Please tell us below.
