FOS has recently held a series of open forums in the General Insurance area. The Ombudsman made a number of interesting observations regarding the volume of broker disputes, how they are resolved and arguments relied upon by brokers in defence of their actions.

The Ombudsman noted that there are not many insurance broker disputes.

He made the following observations in this regard:

  • Most disputes involving brokers arise from brokers self-reporting – FOS finds it is not clear whether in these cases the broker is acting for the Insured or for themselves. For example, sometimes brokers bring disputes on behalf of an applicant however FOS may consider the policy does not respond, but the failure is due to the broker’s conduct, not the Insurer
  • There are very few Determinations as insurance broker disputes seem to resolve before they reach that stage. FOS speculates this may be because brokers have a relationship with the insurer and convince the insurer to pay out to the Insured
  • FOS considers its jurisdictional limit of $166,000 in broker disputes, except in respect of life insurance policies, may explain why there are fewer disputes in this area

In many FOS disputes relating to insurance coverage, the dispute involves arguments as to whether the insured was provided with sufficient disclosure of the policy terms.  The Ombudsman said that provision of a PDS by a broker is not good enough to explain the terms of the policy. The Ombudsman considers the broker needs to explain the products better to clients.

The Ombudsman also signalled an intention to look more closely at the broker/insurer relationship in the future including exercising clause 7.4 of its amended terms of reference which allows the joining of another party to the dispute either at the request of the applicant or the FSP or by FOS’ own motion.

The overall conclusion from the remarks was that FOS expects to see an increase in broker disputes in the future.

FOS will be releasing a paper on Friday 28 October regarding their approach to brokers’ disputes. We will provide a further update once the paper is released.