When ASIC’s new informed consent rules for AFS licensees selling general insurance took effect in July, they sparked a mixed response across the broking community. While some brokers welcomed the changes as a step towards greater transparency and accountability in client relationships, others argued the rules simply add another layer of unnecessary red tape. Reflecting this division, the National Insurance Brokers Association (NIBA) has joined calls for the regulation to be reviewed, advocating for amendments or even a potential repeal.
“Absolutely,” said NIBA’s president Nick Cook (main picture). “It's something that brokers say, ‘Yes, I need to do it, but isn't there already mechanisms there?'”
He suggested that many brokers are feeling suffocated by an ever-increasing regulatory workload.
“We just can't keep adding regulation on top of regulation,” Cook said.
The informed consent rules require brokers to obtain explicit client consent, including a written record, regarding remuneration disclosures. According to ASIC, the aim is “to provide a genuine and real opportunity for the consumer to make an informed decision before deciding to be issued or sold a certain insurance product”
However, Cook said the Insurance Brokers Code of Practice – a voluntary code – already covers declarations around the transparency of remuneration.
Section 6.1 of the Code says brokers need to provide retail clients “with information about any remuneration (including commissions) or other benefits we will or expect to receive as a result of providing Covered Services.”
As a result, NIBA’s president Nick Cook told IB that many brokers have “really struggled” with the informed consent rules because they can’t see the reason behind the new rule.
In the lead up to implementation, there were also other issues. Cook suggested that informed consent wasn’t adequately explained by the regulator. The broker peak body took on the job of educating brokers in a series of webinars.
But several months later, Cook said many brokers remain frustrated because their clients are making it clearer than ever that informed consent rules are unnecessary.
“The frustration for brokers is - now it's been a bit of time - is that when brokers are going to their clients, informing them of the remuneration they're receiving, they're not getting any pushback,” he said.
The NIBA president said, rather than pushback, many brokers’ clients are making tongue in cheek comments like: “Well, I knew you got paid, is that all you get? Of course, no problem.”
Cook said that’s because for retail insurance products, the remuneration is already detailed on the invoice.
“So when the client pays the invoice, isn't that consent implied?” he said.
Cook said modifying this regulation is now part of an ongoing conversation with the government and regulators.
“What we're trying to achieve is to protect the client, and how can we best go about that in the most efficient way,” he said.
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