NIBA CEO Welcome

REDEFINING ADVICE – TIME FOR BROKERS TO SHINE

The concept of general advice has been long debated. After all, if executed in accordance with the Corporations Act, there is an obligation to warn a client that the advice does not take into account the client’s objectives, financial situation or needs. For many years, clients’ needs have been somewhat attended to under a general advice model, where the provision of ‘advice’ is questionable, until now. In a radical proposal, as part of the Quality of Advice Review, the independent reviewer Michelle Levy has delivered a Proposals Paper which, among other things, proposes to do away with the concept of general advice altogether. A strong premise being that many clients believe the exact opposite of what the general advice warning suggests. In a further step, if a provider has or holds information about a client’s objectives, needs or any aspect of the client’s financial situation, then any advice is deemed to be ‘personal advice’, and therefore the provider can no longer deem to have not considered that information and discharge any liability with a general advice warning.

So, the scope of instances where personal advice will be given is expanded considerably. This begs the question of how this could be delivered affordably under the current regulatory regime. The answer, according to the Proposals Paper, is to significantly reduce the compliance burden of providing personal advice, including the removal of the best interest duty, and replacing it with a principle based ‘good advice’ definition, whereby that advice “would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided”. The proposal is aimed at reducing regulatory complexity and burden, while improving the quality of advice.

From a broker perspective, this draws a line in the sand and separates true advice, and the value of that advice to the client, from the pure transaction of providing a product. Under the proposal, a client can effectively go to a provider like an insurer and if they know exactly what cover they want and how much, then they can carry out that transaction. If, however, they need advice as to what product and how much, or that insurer holds information in relation to the clients, needs, financial objectives or financial situation, then the transaction immediately becomes personal advice. Many insurers may choose to offer such a model, which gives the client choice, and allows them to present their product to the client as a solution in an affordable way, but ultimately, there is only one way to access advice that comes from the basis of representing the client, and that is via a broker.

This is a positive outcome for the client, and importantly, allows brokers to clearly articulate their point of differentiation and their value proposition to the client.

There are a number of other proposals, including the removal of the need for Statements of Advice and allowing the Financial Services Guide to be referenced on the website, rather than physically delivered to the client. These are covered further in the representation section of Insurance Adviser. A number of these proposals place further emphasis on the value of the 2022 Insurance Brokers Code of Practice, including the provisions of a Terms of Engagement. NIBA has participated in several industry roundtables, where the majority of participants have been largely supportive of the proposals. In principle, NIBA supports the majority of the Proposals Paper’s recommendations as they relate to brokers, and our response can be found on the NIBA website.

The Quality of Advice Review will continue until the final Report is delivered on 16 December 2022. Consultation regarding conflicted remuneration, including broker commissions, will commence late October, but there is no Proposals Paper to be expected.

In this month’s Insurance Adviser, we cover the latest in news, including preparing for future disasters as the third La Nina approaches, a new Federal agency for disaster responses, the key risks that lie ahead of insurance and the latest on climate change and cyber. We also have feature articles on workers’ compensation and management liability insurance.

I look forward to seeing many NIBA Members at the upcoming NIBA Summit on 12 October, and the Celebration Dinner later that evening in the Ivy Ballroom. At the Celebration Dinner, we will announce the winners of the Vero-sponsored 2022 Warren Tickle Young Broker of the Year and the QBE-sponsored 2022 Stephen Ball Broker of the Year awards, as well as the results of our annual broker survey, which will reveal the 2022 Underwriting Agency of the Year and the 2022 Insurer of the Year winners. This year, we have separated the 2022 Insurer of the Year into two categories – large general insurers and specialist insurers. Of course, we will also be celebrating 40 years of NIBA and I would like to invite all NIBA members to join us in honouring this important milestone.

PHILIP KEWIN

Chief Executive Officer, NIBA