Brokers have branded plans to prohibit intermediaries from moving clients to a new policy or insurer without ‘proven benefit’, "absurd" and "rubbish".
From 1 July, brokers will not be able to move clients to a new policy or insurer, if there is no proven benefit, under the Best Interest Duty guidelines of Future of Financial Advice reforms.
Brokers told Insurance Business the reform was obstructive and unnecessary.
“The concept of disallowing a change in underwriter where there is no ‘reason’ of benefit to the insured is absurd,” said insurance broker David Clarke.
“Insurance is not a commodity. It is the fruition on the broker’s advice; brokers have relationships with insurers and sometimes to maintain those relationships policies need to change hands and often there is little to no coverage or premium benefit to the insured.
“Insurance is a people business, extract the people and we lose the personality, no personality means we have end up with a commoditised product and price becomes the only measure of value.”
Peter Peirano, who co-owns Piranha Insurance Brokers, also disagreed with the plans.
“It never ceases to amaze me some of the rubbish that comes out of FoFA. While their hearts are in the right place sometimes their minds are in planet Pluto. A broker is supposed to do the right thing at all times by their clients anyhow.”
Charmian Holmes, solicitor director of law firm The Fold, said the new laws sent the message “if it ain’t broke, you’re not allowed to fix it”.
Brokers have to understand what their client is trying to achieve when buying insurance and put it at the top of their list of priorities. rather than just explaining the available insurance products, she added.
“Simply selling someone a policy isn’t going to cut it any more. Brokers must step into the client’s shoes and consider whether the client will be better off with the policy, only then can they recommend it.”
However, Holmes said brokers should not find complying with the Best Interests Duty unduly onerous. “This is because most brokers take a common sense approach and focus on meeting the specific client’s needs,” she added. “Brokers should however revisit their processes and training to make sure their staff understand what they need to do to be compliant with the best interests duty.”
