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Industry bulletin
INSURANCE MARKET FAILURE A NATIONAL CRISIS: ASBFEO
The Australian Small Business and Family Enterprise (ASBFEO) Ombudsman Kate Carnell has handed down her Insurance Inquiry final report, that reveals widespread market failure in regard to the availability and affordability of essential small business insurance products.
More than 800 small businesses took part in the insurance survey, describing their feedback as both insightful and concerning Carnell said, “Our Insurance Inquiry has revealed we are in the grip of a national crisis that is killing small businesses.”
In addition to the response from small businesses, the report also took into consideration the 20-plus submissions from industry stakeholders.
She added, “Hundreds of small businesses have told my office they face closure if insurance remains unavailable to them. In reality, it means thousands of small businesses are likely impacted and there could be dire consequences for the Australian economy if left unaddressed.”
The final report makes a suite of recommendations designed to rebalance risks taken on by insurers and make small business insurance products more accessible.
A major recommendation included in the report is to expand the Australian Reinsurance Pool Corporation (ARPC) to provide reinsurance for all natural disasters on commercial property insurance.
Carnell also said that the insurance industry urgently requires a mandatory Code of Practice, recommending the Australian Financial Complaints Authority (AFCA) be given additional powers to deliver dispute resolution and enforcement.
The report highlights a lack of availability of public liability and professional indemnity insurance, pin-pointing the unlimited nature of injury claims and potential for large damages as a key factor.
She also revealed that there have been reports of poor conduct by insurers, “Including very late notice of renewal terms and price hikes, effectively putting the small business in the position of accepting the terms or being uninsured.”
You can access the entire report online: asbfeo.gov.au/inquiries/insurance-inquiry
Above Hundreds of small businesses will face closure if insurance remains unavailable to them.
ACCC RELEASES THIRD AND FINAL REPORT ON NORTHERN AUSTRALIA INSURANCE INQUIRY
Over the holiday period, the Australian Competition and Consumer Commission (ACCC) released their third and final report of the Northern Australia Insurance Inquiry.
Most concerning for insurance brokers was the inclusion of an earlier recommendation from the 2019 interim report which called for the removal of the exemption for brokers under the current conflicted remuneration ban. Although not a new recommendation, it remains worrying for both the National Insurance Brokers Association (NIBA) and its members.
The report also contained a number of concerning findings which confirm anecdotal evidence provided to NIBA by members.
NIBA will provide a detailed response to the Federal Government, outlining broker concerns and highlighting the potential impact on brokers and their clients. NIBA strongly believes that these recommendations are unlikely to provide any significant relief to property owners in northern Australia, and will not ease the availability and affordability issues in that market.
NIBA CEO, Dallas Booth said, “We will continue to prepare for the 2022 review of remuneration arrangements in general insurance, as recommended by the Royal Commission. NIBA has already started this process by commissioning the Deloitte Access Economics Report on the economic role and value of insurance broking, and will continue to liaise with government, regulators and other stakeholders on the important work brokers do for their clients and the broader community.”
The ACCC indicated they look forward to making submissions to the 2022 review recommended by the Royal Commission, as does NIBA.
For breaking news and updates curated specially for insurance brokers please visit: insuranceandrisk.com.au/category/news/
The Australian Securities and Investment Commission (ASIC) has released a new regulatory guide on the product design and distribution obligations (DDO).
ASIC Acting Chair Karen Chester said, “The design and distribution obligations are a game changer. They are designed to embed a consumer-centric approach and assist industry to deliver better outcomes for consumers while managing non-financial risks and avoiding costly remediation.”
NIBA CEO Dallas Booth said it is disappointing ASIC did not engage more effectively during the development of the new Regulatory Guide. NIBA has been calling for ASIC to outline the expected operation of DDO for typical general insurance policies, including worked examples of how ASIC expects the requirements to work, “We have still not seen this,” said Booth.
“At the end of the day, the obligations on insurance brokers will very much depend on the wording of the Target Market Determinations prepared by insurers.”
NIBA has been calling for a consistent approach to the development of TMD’s in general insurance, in order to ensure all parties are likely to be observing their new obligations, and to avoid unnecessary and inefficient procedures which will add cost but little or no benefit for policyholders.
“The good news is that the main DDO obligations do not apply when personal advice is provided in relation to the product. This does not remove all obligations, however,” explained Booth.
“DDO is going to be a major challenge for broking firms during 2021, and systems and processes will need to be developed to ensure compliance with the new obligations. NIBA will now start to provide detailed information to Member firms to help them implement the new rules.”
LEGISLATION PASSED TO IMPLEMENT ROYAL COMMISSION
The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 has been passed by the Federal Parliament, addressing 20 recommendations and one additional commitment from the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
National Insurance Brokers Association (NIBA) CEO, Dallas Booth welcomed the passage of the Bill through parliament, and said, “We will now develop information packages for our members on the range of reforms contained in the Bill. This will be a major area of focus for NIBA during 2021.”
Insurance Council of Australia (ICA) CEO, Andrew Hall said, “The Insurance Council and its members now look forward to working with Commonwealth Treasury, ASIC, and other groups such as consumer advocates to bring these reforms to life.
“There are practical implementation issues that we are keen to see resolved so the legislation can maximise consumer outcomes as effectively and quickly as possible.”
NIBA PROMOTES THE ROLE AND VALUE OF BROKERS TO GOVERNMENT
The National Insurance Brokers Association (NIBA) met with a representative of the NSW Minister for Finance and Small Business, Damien Tudehope as well as the NSW Shadow Minister for Finance and Small Business, Daniel Mookhey to discuss the Deloitte Access Economics report, The Economic Value of Insurance Broking and the upcoming review into broker remuneration.
NIBA CEO Dallas Booth said, “These meetings are just some of many that NIBA is conducting with members of government, regulators and business and consumer groups around Australia in the lead up to the 2022 ASIC review.”
Booth also revealed that the Association made a submission on behalf of brokers in response to ASIC’s Consultation Paper 332 Promoting access to affordable advice for consumers (CP 332).
The submission states, “NIBA is firmly of the view that the Australian community deserves access to and needs good-quality advice in relation to their general insurance risks and needs. The fact that increasing numbers of retail clients are seeking the advice and support of an insurance broker is evidence of this position.”
This submission is in response to the inquiry that forms part of ASIC’s unmet needs of advice project.
“Only general insurance brokers are trained, experienced and licensed to provide personal advice to retail clients in relation to general insurance needs, products and services. Virtually all insurance companies operate under a general advice model, and do not provide advice to prospective policyholders on the insurance products likely to meet their individual needs and circumstances.”
Booth added , “A number of NIBA members have indicated that they have examined the potential for operating under a personal advice model, but having regard to regulatory and compliance obligations it is not cost effective to do so.”
He said, “NIBA would like to suggest that instead of starting with the legislation, we start with the needs of clients.”
For breaking news and updates curated specially for insurance brokers please visit: insuranceandrisk.com.au/category/news/
NIBA’S TOP FIVE FOCUS AREAS FOR 2021
National Insurance Brokers Association (NIBA) CEO Dallas Booth, believes 2021 will be an interesting year for insurance brokers, “NIBA has been examining a plethora of legal and regulatory updates on behalf of our members and we are engaged in a lot of discussions with Treasury and the Federal Government to ensure that insurance intermediaries’ concerns are represented to policy makers.”
Booth has listed the top five focus areas for NIBA in 2021 as follows: 1. Preparing for the 2022 review of remuneration arrangements in general insurance, as recommended by the
Royal Commission. NIBA has started this process with the Deloitte Access
Economics report on the role and value of insurance brokers in Australia, which sets the foundation on which a range of industry submissions will be based. 2. Completing the review of the Insurance
Brokers Code of Practice, which will demonstrate the industry’s ongoing commitment to professionalism, ethics and integrity, and to putting the interests of clients first at all times. 3. Continuing to work with Australian
Securities and Investment
Commission (ASIC) on setting higher standards for education and training of insurance brokers. 4. Working with our members to implement the reforms coming out of the Royal Commission. 5. Promoting the role and value of insurance brokers more broadly, to a wide range of stakeholders and interested parties.
He said, “Late last year we asked our members to provide input to NIBA’s 202021 policy strategy, we were overwhelmed with responses from brokers all over Australia. As the representative body for insurance intermediaries, we will continue to engage on these and other important issues. If you would like to provide input on any of these or other issues, please contact NIBA’s Policy and Research Manager via email (ahextell@niba.com.au).”
ASIC SEEKS FURTHER FEEDBACK ON INTERNAL DISPUTE RESOLUTION DATA REPORTING
The Australian Securities and Investment Commission (ASIC) is seeking further feedback on proposed requirements for internal dispute resolution data reporting.
National Insurance Brokers Association (NIBA) CEO, Dallas Booth, said: “NIBA has been examining the discussion paper and will provide a submission to ASIC on behalf of members.”
This request follows the regulator’s earlier consultation through Consultation Paper 311 Internal dispute resolution: Update to RG 165 (CP 311) which was published on 15 March 2019.
New internal dispute resolution (IDR) standards and requirements will apply to financial firms that deal with retail clients, including superannuation trustees, from 5 October 2021. This includes the requirement to record all complaints that a firm receives. Mandatory IDR data reporting will not commence on that date, but ASIC wants to give firms some certainty about what information will be collected as they make changes to their systems now.
In response to feedback received to CP 311 the regulator reached preliminary positions on a number of issues related to data reporting. ASIC has also simplified the draft data dictionary and reduced the number of data elements from 37 to 23.
For breaking news and updates curated specially for insurance brokers please visit: insuranceandrisk.com.au/category/news/
THANKS FOR VOTING US 1ST IN 23 CATEGORIES
2020 NIBA Broker Market Survey
OVERALL
Is a trusted partner*
Is a brand that delivers on promises BEST BROKER EXPERIENCE
Underwriting overall satisfaction Work with me to find a solution for my client
ACCOUNT MANAGEMENT
Understand underwriting for my client’s needs
Have expert knowledge in specific product areas Are comfortable having complex or challenging conversations
Communicate when underwriting appetite has changed
Overall satisfaction*
Overall opinion versus other insurers*
Account management overall satisfaction Responsiveness to my needs and the needs of my clients
Takes ownership for resolving my business issues and follows through on commitment
PRODUCT EXPERIENCE
Willingness to negotiate for the benefit of my client Takes the time to learn about my business and client needs
Strong product knowledge and technical expertise
CLAIMS EXPERIENCE BRAND EXPERIENCE
Responsiveness
Underwriting flexibility Ability to tailor a policy to suit my client’s needs
Product coverage and wording that suits the needs of my client
Policy conditions and cover Staff are knowledgeable about what the product covers in the event of a claim
* Liberty Specialty Markets shares the first place ranking with other insurers in these categories. The independent NIBA Broker Market Survey was conducted from July to August 2020 and compared 18 general insurers in Australia. Develops and maintains strong relationships
