The revamped Insurance Brokers Code of Practice (the Code) came into effect on 1 January 2014. Its content is clear and more understandable for consumers. The Code is produced by National Insurance Brokers Association (NIBA) and forms part of a national self-regulatory scheme committed to developing relationships between insurers, brokers and consumers. It is administered by the Financial Ombudsman Service (FOS) which monitors compliance with the Code by all subscribing members and handles consumer disputes with insurance brokers.
The changes to the Code bring substantial refinement and expansion of the former Code’s standards in the form of 8 discrete ‘service standards’ and other general standards in respect of the Code’s complaints and dispute handling process. These changes follow recent developments in statutory law and commit Code members to increased levels of customer service whilst also bolstering the Code’s accessibility and user-friendliness to brokers and clients alike.
Application of the code
The Code applies where a Code member provides ‘Covered Services’ to a client. Covered Services are defined as ‘insurance services’ and ‘associated services’.
Insurance services means all general insurance services, and life insurance services in relation to life policies (as defined in section 9 of the Life Insurance Act 1995 (Cth)).
The Code recognises that associated services include claims administration services, loss control and risk management advice, mutual fund or captive administration, risk inspection, and premium funding arrangement or referral.
Reinsurance services are not within the ambit of the Code.
The service standards
The Code commits Code members to 12 service standards aimed at safeguarding self regulation of the broking industry. The service standards provide:
- We will comply with all relevant law. ( NIBA has used the recent Future of Financial Advice reforms to market to consumers enhanced protections, such as the ‘best interests’ and ‘appropriate advice’ obligations under S.961B and S.961G of the Corporations Act 2001 (Cth)) (Corporations Act).
- We will transparently manage any conflicts of interest that may arise We will clearly tell you if we do not act for you (for example, where the Code member is acting for an insurer. This also includes disclosing any use of wholesale insurance brokers to assist in the arrangement of insurance).
- We will clearly tell you about the scope of the covered services (including whether the service provided is a personal advisory services which is based on the broker’s consideration of the client’s personal needs, objectives or financial situation).
- We will discharge our duties diligently, competently, fairly and with honesty and integrity.
- We will clearly tell you how the covered services are paid for before we provide them, and answer any questions you have. (This standard obliges the broker to disclose remuneration from an insurer , or a fee paid by the consumer, or both. If the broker intends to retain any of the commission/brokerage paid by the insurer or any fee paid by the client if the insurance policy is cancelled before the period of insurance ends, this will also be advised in advance).
- We will handle any money received in accordance with relevant law and any agreement with you.
- We will ensure that we and our representatives are competent and adequately trained to provide the relevant services and to maintain this competence (including ensuring that records of their representatives’ training are kept for at least five years and to make the records available for examination by the FOS or the ‘Code Compliance Committee’ (CCC) on request).
In relation to Covered Services the Code provides:
- We will respond to catastrophes and disasters in a timely, professional, practical and compassionate manner in conjunction with any industry-wide response.
- We will ensure that we have an internal complaints and disputes handling process that meets the Code’s complaints and dispute process standards.
- We will support NIBA in promoting the Code and make information on the Code (including how to make a complaint) and the covered services readily available to you.
- We will not engage in activity or inactivity that is reasonably likely to bring the insurance broking profession into disrepute.
The general standards
Much of the complaints and dispute resolution process set down by the general standards follows the minimum legal standards required under the Corporations Act in respect of the need for financial services licensees to adopt ASIC approved internal and external dispute resolution schemes where financial services are being provided to retail clients. However, the Code’s general standards apply to all instances where Code members are providing covered services to clients (retail or otherwise) and include steps for:
- Handling of complaints under a Code member’s internal complaints and disputes handling process, in which unresolved complaints are escalated (as disputes) to a dispute resolution manager.
- Referral of unresolved disputes to the FOS, which will determine whether the dispute falls within the FOS terms of reference. If not within its terms of reference, FOS will arrange to determine if it falls within the terms of the Code.
- Reporting a breach of the Code to the ‘Code Compliance Manager’, including provisions for the CCC to determine breaches and impose appropriate sanctions. Sanctions can include publishing details of any non-compliance by a Code member, including their name and the name of the company they represent.
Whilst clients have a right to make a complaint under the Code if they believe there has been a breach of the relevant standards or provisions, the Code does not create any legal or other right as between the Code member and client or any person other than NIBA.