On Thursday, significant changes to the way insurance brokers carry out their work will take effect. The Australian Securities and Investments Commission’s (ASIC’s) new rules require brokers to obtain informed consent from retail clients about receiving a commission before selling them insurance. Some insurance brokers see an opportunity in this shift in the way they engage clients.
“I think it [the new rules] includes clear disclosures and open conversations about the value of our service and that’s really important,” said Tina Wilkinson (pictured), head of risk and compliance, broking, for the Envest Group.
Brisbane-based Wilkinson said this transparency can foster trust and strengthen relationships with clients. “For us it’s about embracing the transparency and promoting the value of using a broker,” she said.
However, industry stakeholders agree that each brokerage needs to decide how to best apply the new rules to their business.
“This is grey, this is not simple black and white, so please do grapple with informed consent, please do get and seek advice and make sure whatever you put in place is right for you and your business,” said Richard Klipin, CEO of the National Insurance Brokers Association (NIBA). He moderated a recent NIBA webinar about the changes where Wilkinson was a panellist.
After rolling out training and education, Wilkinson said her firm has compliance and operations teams throughout the Envest business looking to monitor and ensure compliance across the group from an AFSL perspective.
Klipin asked her to look ahead a few weeks – what does she expect to have happened across her broker network?
She said this will depend on how each Envest business interprets and implements informed consent. “There could be very little impact for existing clients and then we’d be looking for new clients, new business and implementing the informed consent at that point and considering the grandfathering provisions as well, but hopefully not too much impact,” said Wilkinson.
One reason for the relative ease of this transition to ASIC’s new rules is that, for some time, like some other brokerage businesses, Envest already discloses insurance commissions as a dollar amount on invoices to clients.
However, Wilkinson said her firm still needed to understand the “core principles” behind the changes. They looked at ASIC’s explanatory memorandum, the Corporations Act, the ASIC Guidance Note.
“We really needed to understand what we needed to do before we could come up with a practical solution,” she said.
Wilkinson told Insurance Business that a dedicated team prepared and published a concise guidance note to help its network of businesses. “Ignoring the noise, we started with the basics by focusing on a review of the law and the explanatory notes to assess what information we needed to provide, having regard to what we already provide, and the multitude of ways in which our brokers communicate with their clients,” she said.
The Envest leader said the “primary focus” was properly informing clients and making the process “as seamless as possible.”
“We are designing a systems-wide solution, with alignment across our businesses,” said Wilkinson. “Our agreed approach includes clear and simple communication templates, education and training sessions and a feedback process to allow for timely revisions and improvements to the proposed process.”
The first step, said Hextell, is to decide whether the brokerage is providing or likely to provide personal advice? “If you are providing general advice and not taking into account the client’s financial objectives and needs or you are not leading the client to assume that you are,” she said, “the informed consent obligations do not apply.”
The next question to ask, said Hextell, is if the client is an individual or a small business?
“So, a small business for the purpose of general insurance and determining a retail client is less than 20 people or 100 [people] if involved in the manufacture of goods,” she said.
Are you a broker? How is your workplace going about implementing the new compliance rules? Please tell us what you’re doing and some of your tips below.
