On 7 October 2012, National Insurance Brokers Australia (NIBA) announced a revised Insurance Brokers Code of Practice (the Code) which deals with 12 new Key Code Standards addressing the issues that NIBA believes regulators are likely to focus on in the future, including the new statutory best interest duty for retail and wholesale business clients.

The Code, first introduced by NIBA in 2006, sets standards of customer service for subscribing brokers in relation to their interactions with individual and small business clients with a view to increasing transparency, efficiency and consumer confidence in the insurance broking industry.

The Code applies to general insurance and life insurance services and includes claims administration, loss control and risk management advice, mutual fund or captive administration, risk inspection and premium funding arrangement or referral. Reinsurance is expressly excluded from its application.

The Code is administered by the Financial Ombudsman Service (FOS) which monitors the Code for compliance by its members and also handles consumer disputes with insurance brokers. There is also an independent Code Compliance Committee that oversees its administration. Code subscription is not compulsory, although all NIBA members are automatically bound by the Code and non-NIBA members can elect to subscribe to it.

The reformulation of the Code is the result of a two-month consultation commissioned by NIBA with key stakeholders including NIBA members, consumer representatives, regulators, FOS and the Federal Government. According to the resultant report produced by Professional Financial Solutions the main issue raised in these consultations was an overall lack of awareness about the Code in terms of its existence, operation and impact, at both client and broker level. It is therefore unsurprising that the new formulation of the Code focuses on efforts to promote the Code and its benefits, by clarifying matters such as Code objectives, how to navigate the Code and to whom the Code applies.

The new 12 Key Code Standards are:

  1. We will comply with all relevant law.
  2. We will transparently manage any conflicts of interest that may arise.
  3. We will clearly tell you if we do not act for you in providing our covered services.
  4. We will clearly tell you about the scope of our services.
  5. We will discharge our duties diligently, fairly and with honesty and integrity.
  6. We will clearly tell you before providing our services how they are paid for and answer any questions about our remuneration.
  7. We will handle any money received in accordance with relevant law and any agreement with you.
  8. We will ensure that we and our representatives are competent and adequately trained to provide the relevant services and will maintain that competence.
  9. We will respond to catastrophes and disasters in a timely professional, practical and compassionate manner in conjunction with any industry-wide response.
  10. We will ensure that we have an internal complaints handling process for covered service that meets the Code complaints and dispute process standards.
  11. We will promote the Code.
  12. We will not engage in activity or inactivity which is reasonably likely to bring the insurance broking profession into disrepute.

The Code will take effect from 1 January 2014, with NIBA focusing current efforts on promoting the Code and training members in its operation. These initiatives also provide non-subscribing brokers with the opportunity to learn more about the Code and how they can benefit from its operation. The Australian Government has welcomed the regime generally as an effective tool for self-regulation of the broking industry and commended NIBA for its efforts in further improving the service to customers.

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