14 minute read
Bringing a new client on board
NIBA has developed protocols over a long period of time in order to ensure there is clear understanding between underwriters, brokers and ultimately clients as to where each one stands during the process.
BY DALLAS BOOTH
We have had a number of inquiries and expressions of concern in recent months in relation to industry agreed protocols for bringing new clients on board.
Of course, the client is always the key focus of attention, and it is crucially important that all parties are acting in the best interests of the client at all times. Also, it is entirely appropriate that the insurer/underwriter has full and proper confirmation that the client wishes the broker to help them with their insurance needs.
There are three items I would particularly like to mention. Experienced brokers will be familiar with these matters, but less experienced brokers might not be familiar with these matters. The protocols are binding on all NIBA members and their employees and authorised representatives.
Before the broker is formally appointed
If a broker wishes to obtain a quote on behalf of a PROSPECTIVE client (i.e. before the broker has been formally appointed to act on behalf of the client), the broker should obtain a Letter of Authority to Review and Quote. The letter authorises the broker to make inquiries from relevant insurers, in order to be able to provide a quote to the prospective client. The letter should be on client’s letterhead, and should be signed by a director, financial controller or the owner of the business. The letter should be signed, dated and should state that it is valid for a certain period of time.
More information about the Letter of Authority to Review and Quote is set out on the NIBA website.
Once the broker is formally appointed
Once a broker has been formally appointed to act for and on behalf of a client, they should obtain a Letter of Appointment. Once again, the Letter of appointment should be on the client’s letterhead, and should be signed by a director, financial controller or the owner of the business. The letter should be signed and dated, and clearly set out the terms of appointment. The purpose of this letter is to avoid misunderstandings, confusion and disputes as between the insurer(s), previous and current insurance brokers, and the client.
It is important to note that if an insurance broker represents the scope of their authority to act in a way that is broader than what the client believes it to be, the broker may be subject to action for misleading the client, and may also have breached their AFS licensing obligations and their duty to the client, amongst other things. There may also be a breach of their obligations under the Insurance Brokers Code of Practice.
Further information about the Letter of Authority to Review and Quote, or the Letter of Appointment, including template letters, can be found on the NIBA website at: niba.com.au/ html/letters-of-appointment.cfm
Broker appointed at the time of renewal
One of the rules of NIBA membership relates to the allocation of commission and brokerage when the new broker is appointed to act for a client in relation to an insurance program that had been arranged for the client by another broker. This is NIBA’s Rule 3.
Rule 3 applies where a broker (the new broker) is appointed to act in relation to a contract of insurance arranged for the client by another insurance broker (the original broker).
This typically occurs when the original broker has arranged renewal of cover, and invariably has placed the cover with the insurer(s), and a new broker then takes over the business. Often this will involve the new broker collecting the premium for remittal to the insurer.
Where this occurs, the new broker is required to account to the original broker for any brokerage received by the new broker in relation to the existing policy, as soon as is reasonably practicable after receipt of that brokerage.
NIBA receives a number of requests for Rule 3 to be applied each year. Our approach is to determine whether the new broker has been appointed to act in relation to an existing contract of insurance arranged by the original broker. If this is the case, we will seek to apply Rule 3 in relation to any commission or brokerage that had been collected by the new broker.
NIBA does not apply Rule 3 in cases where the new broker reviews the insurance program and arranges material changes to the client’s cover. Where there has been substantial change to the cover being provided, we do not believe the new broker is acting in relation to a contract of insurance arranged by the original broker.
Rule 3 has been a key rule of NIBA membership for many years, and we ask all members to be mindful of the rule and to abide by its provisions when called upon to do so.
NIBA’s Rule 3 can be obtained at the following page on the NIBA web site: niba.com.au/resource/ NIBA_rules_regulations.pdf
EVER-INCREASING PREMIUMS WITH UNREASONABLE EXCLUSIONS HAVE LED TO THE CREATION OF A NEW SELF-PROTECTION OPTION FOR COMMUNITY-FOCUSED ORGANISATIONS ACROSS AUSTRALIA
BY JEN STOREY
Our Ark Mutual
When the property insurance renewal for the Anglican Diocese of North Queensland jumped from $500,000 to $2,500,000 in a year despite very low claims over a long period of time, the Archdeacon began to look for alternatives.
The result, launching in December 2020, is Our Ark, a new Discretionary Mutual protects the Diocese’s $120 million in assets.
Our Ark is now collaborating with brokers and advisors across Australia to provide quotes for not-for-profit, community groups, aged care, schools, childcare and faith-based clients that are facing similar challenges with under-service, spiking renewals and unreasonable exclusions.
What is Risk Protection?
With Mutuals, every customer becomes a Member, who is also an owner. Discretionary Mutuals are public companies limited by guarantee and have long existed in Australia to provide risk protection, an insurance-like product, to buying groups.
Classed as a Miscellaneous Financial Risk by ASIC, risk protection requires PDS and FSG documentation.
Reinsurance for large claims and catastrophes is obtained by the Mutual with the assistance of Willis Re, in the same way an insurer buys reinsurance.
Stamp Duty and the Emergency Services Levy do not apply to risk protection products, so there are no insurance tax on-costs.
How claims work
The Board has the legal obligation to act in the best interest of Members and has the discretion to make key decisions, including ones about claims.
When an insurance claim meets all policy
A better way to self-insure
Mutualising risk across organisations that understand each other creates benefits including: • Lower prices from operational efficiencies • Maximising group buying power for reinsurance • Providing broad, fair cover with few exclusions • The Mutual legal structure requiring open and transparent operations • The shared incentive by Members to manage risks and maintenance to reduce claims • Members keeping profit to increase cover or reduce contributions
How Our Ark works with Brokers
“We consider the risk characteristics and claims history of each property when quoting,” Mr Pollack explained.
“We hear from brokers all the time, where despite long term favourable claims experiences, their client’s premium increases are exponential. There’s another way to do this,” said Mr Pollack.
Our Ark is open to members with a single, or portfolio of properties, from across Australia. Other products, such as liability protection, will be launched during 2021.
“If a Broker’s AFS licence does not allow them to provide a risk protection quote, we collaborate with them to ensure their client has a viable alternative,” he said. “We will help a Broker help their client – that’s the Mutual way of working.”
terms and conditions, there is a contractual right to have the claim paid. When it only meets some, the claim can be denied.
With Risk Protection, there is the right to have the claim considered, even if, at prima facie, not all conditions are met. The Board can consider the totality of a situation and exercise discretion over claims.
The Our Ark Board has deep insurance and community understanding
The Chair, Rowan Ward currently serves on the National Injury Insurance Scheme QLD and the Insurance Commissioner’s Advisory Committee for Motor Accident Insurance (QLD). He is the former Chief Actuary of Suncorp.
Chris Wright, Archdeacon of the Anglican Diocese, is a Member Representative on the Board. He is also a Director of the Trinity Anglican School in Cairns, and active in the local ambulance, schools, childcare and neighbourhood community centres. In 2019 he was awarded a Medal of the Order of Australia for community service.
Charles Pollack, the former Chief Actuary of Youi and a former Principal Actuary at Suncorp, is CEO. He is also the CEO of Picnic, the provider of the turn-key Mutual solution used by Our Ark to provide underwriting, risk management, regulatory compliance and governance support.
In Sydney, Melinda Snowden, a professional Non-Executive Director with 20 years’ experience in financial markets, audit, risk and governance and Mark Arnold, the Chair of Picnic, round out the Board.
Pooled self-insurance with reinsurance protection
To learn more about the Broker Referral program or to receive a quote for your client visit: https://www.ourark.com.au/NIBA
INSURANCE BROKERS CODE REVIEW IS ABOUT TO GO PUBLIC
The National Insurance Brokers Association of Australia (NIBA) will shortly invite feedback and submissions from insurance brokers, clients and consumers, organisations, representative associations, and any other interested stakeholders as part of the review of the 2014 Insurance Brokers Code of Practice.
The Code of Practice
The Insurance Brokers Code of Practice (Code) is an agreement between NIBA and its members and other brokers who subscribe to the Code (subscribers), which sets out the minimum service standards that clients can expect from subscribers. The Code and Code Procedures also outline how complaints and disputes regarding potential breaches of the Code can be resolved. A link to the Code and its guidance notes can be found at niba. com.au/codeofpractice/overview.cfm and the Code Procedures at niba.com.au/ codeofpractice/c3-complaints-and-disputesresolution-1.cfm.
The Code is independently administered by the Australian Financial Complaints Authority, with Code compliance monitored independently by the Insurance Brokers Code Compliance Committee (IBCCC). The IBCCC Annual Review 2019-20 analysing how subscribers complied with the Code can be found at insurancebrokerscode.com. au/app/uploads/2020/10/IBCCC-AnnualReview-2019-20-Oct2020.pdf.
The Code sets out 12 service standards that subscribers commit to:
Standard 1: We will comply with all relevant law
Standard 2: We will transparently manage any conflicts of interest that may arise
Standard 3: We will clearly tell you if we do not act for you
Standard 4: We will clearly tell you about the scope of our covered services
Standard 5: We will discharge our duties diligently, competently, fairly and with honesty and integrity
Standard 6: We will clearly tell you how our covered services are paid for before we provide them and answer any questions you have
Standard 7: We will handle any money received in accordance with relevant law and any agreement with you
Standard 8: We will ensure that we and our representatives are competent and adequately trained to provide the relevant services and will maintain this competence
Standard 9: We will respond to catastrophes and disasters in a timely, professional, practical and compassionate manner in conjunction with any industrywide response
Standard 10: We will ensure that we have an internal complaints and disputes handling process that meets the Code Complaints and Dispute process standards
Standard 11: We will support NIBA in promoting the Code and make information on the Code (including how to make a complaint) and our Covered Services readily available to you
Standard 12: We will not engage in activity or inactivity that is reasonably likely to bring the insurance broking profession into disrepute.
Many of the Standards include additional as to how the Standards might be achieved.
The Code Review
NIBA believes the Code has been fit for purpose and remains a leading benchmark for industry self- regulation. As part of its commitment to professionalism and continuous improvement, NIBA is undertaking a review of the Code to ensure continuing high standards of service allowing the profession to remain in step with regulator and community expectations.
The Code was last reviewed and updated with effect from 1 January 2014. In 2018, NIBA commenced a review of the Code with a view to undertaking consultation during the course of 2019. With the delivery of the final report of the Royal Commission into Misconduct in Banking and Financial Services, NIBA decided to pause the Code review until the Governments responses to the Royal Commission’s recommendations became clear.
This was followed by the disruption of most areas of economic activity as a result of the COVID-19 pandemic. As Australia moves out of the turbulence of 2020, NIBA has committed to proceeding with the Code review in 2021 in order to maintain the relevance and currency of the Code.
The NIBA Board has engaged a third-party consultant to conduct an independent review of the Code with a view to submitting the revised Code to ASIC for approval of the Code under Regulatory Guide 183. In undertaking the review, the NIBA Board recognises the importance of ASIC approval of the revised Code as “it is a signal to consumers that this is a code they have confidence in.”1
In the interests of transparency and continuous improvement, the Code review is not limited in its scope, with NIBA’s intent being to ensure that the Code remains relevant and a benchmark of industry self-regulation in a regulatory environment that has turned its focus more keenly to community expectations, culture, and conduct.
Review Pathway
The next step in the Code review will be the publication of a Discussion Paper prepared by the independent reviewer in order to
1 ASIC, Regulatory Guide 183, March 2013, 4 [183.3].
facilitate formal submissions in relation to the current Code. The Discussion Paper sets out topics for consideration which have been derived from common themes arising from preliminary discussions that have already taken place between the independent reviewer and key stakeholders.
The key stakeholders who have contributed their preliminary views include representatives from the following organisations: • Australian Financial Complaints
Authority; • Australian Securities & Investments
Commission; • Consumers Federation of Australia; • General Insurance Code Governance
Committee; • Insurance Brokers Code Compliance
Committee; • Insurance Council of Australia; • NIBA Regulatory Affairs Committee; • NSW Office of the Small Business
Commissioner; and • Australian Small Business & Family
Enterprise Ombudsman.
The NIBA Board of Directors has taken time to reflect on the common themes that have emerged from these discussions and has provided the independent reviewer with NIBA’s preliminary comments and suggestions for change in response. In the interests of transparency, NIBA has made the proposed changes to the current Code available at: niba.com.au/html/niba-copreview as part of the review consultation. It is important to note that the document reflects NIBA’s initial thoughts and does not take into consideration design/layout/ readability, which will be considered and addressed before the revised Code is finalised.
In preparing the Discussion Paper, the independent reviewer has also had the benefit of the recent significant code review work undertaken by other financial services
Invitation to contribute
We encourage everyone to consider the Discussion Paper and provide a submission as part of the review. The Discussion Paper and other relevant information will be available on the NIBA website, at the following link: niba.com.au/html/niba-cop-reviewindustries, and relevant regulatory reviews, including the Royal Commission Final Report, and the regulatory response to the Royal Commission.
The aim of the Discussion Paper is to foster discussion and feedback on the key areas identified, raise any other key issues to consider, and suggest the best approach to implementation to ensure that any Code changes are reasonable and can be executed in practice to achieve the intended benefits.
Target Timeline
The planned timeline for the Code review is as follows: 8 Feb – 9 April 2021: Public release of Discussion Paper and request for submissions. 12 April – 21 May 2021: Invitation for key stakeholders to meet Independent Reviewer to discuss submissions and NIBA’s proposed changes. 24 May – 25 June 2021: The independent reviewer will review and assess any feedback from submissions. If necessary, prepare a further draft Discussion Paper arising from stakeholder and public consultation and re-plan timeline to accommodate additional consultation. If additional consultation is required, the timeline below will change. 28 June – 12 July 2021: Finalise outstanding questions and issues prior to issuing final report. 30 July 2021: Final Review Report released to NIBA Board with Code recommendations arising from consultation. Second half of 2021: Finalise revised Code with NIBA Board approval. NIBA to submit revised Code to ASIC for approval. Launch at NIBA Convention 2021. Mid to late 2022: Revised Code becomes effective following training and roll out assistance to subscribers.
submission.cfm.
Submissions may be made confidentially, or you may choose to make a public submission which will be available on the Code Review Submission page.
Submissions will remain open until 9 April 2021.
