Consumer groups are warning that the current soft insurance market may open the door to remuneration practices that could disadvantage clients unless regulators step in.
The Australian Consumers Insurance Lobby Inc (ACIL) has called on oversight bodies – including the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC), and the Insurance Brokers Code Compliance Committee – to monitor how brokers adjust their pay structures during market downturns.
ACIL expressed concern that some brokers may increase commissions while premiums fall, without adequately disclosing these changes to clients.
Under their obligations as Australian Financial Services Licence (AFSL) holders, brokers must operate efficiently, honestly, and fairly. Adjustments to commission or fee arrangements that lack transparency could breach these standards, ACIL said.
Tyrone Shandiman, ACIL’s chair, said past insurance cycles have shown that such conduct is not unprecedented.
“We have seen examples from previous soft market cycles, including in 2016, where brokers negotiated 20% premium reductions but failed to pass those savings on. Instead, they increased commissions on top of prior fee-for-service models, leaving clients significantly worse off without proper disclosure,” he said.
He added that this has occurred even with sophisticated clients such as large apartment buildings, where disclosure is often presumed unnecessary – an assumption that’s misplaced.
The organisation said changes in broker income that are not accompanied by shifts in risk profiles or policy design should be examined closely. ACIL noted that identifying such conduct can be done by reviewing broker income data for significant year-on-year changes.
In a recent submission to the review of the National Insurance Brokers Association (NIBA) Code of Practice, ACIL proposed several reforms. These include:
“At a minimum, brokers must be upfront with clients when changing remuneration structures – especially where the benefit flows to the broker at the client’s expense,” Shandiman said. “That means ensuring clients are properly informed and their consent is genuinely obtained. If current remuneration models are, as the industry claims, the right and fair way for brokers to be paid – then there should be no issue prominently displaying this information to clients. Concealing it doesn’t just undermine trust – it damages the professional image of the entire broking industry and reinforces negative perceptions about a lack of transparency.”
Meanwhile, a proposed reform in New South Wales to end commission-based compensation in strata insurance has sparked division.
The policy, floated by the NSW government, would prohibit strata managers from earning commissions on insurance placements and instead introduce fixed-fee structures.
Consumer advocates – including ACIL and the Owners Corporation Network (OCN) – argued that eliminating commissions is critical to removing conflicts of interest and improving pricing clarity in strata insurance.
Karen Stiles, OCN policy director, said previous inquiries have uncovered significant shortcomings in the sector.
“The government’s own investigations have exposed extensive misconduct in strata insurance. These practices have cost lot owners dearly – in trust, transparency, and inflated premiums,” she said.
Shandiman added that the issues are deeply rooted. “The problems in strata insurance are not isolated incidents – they’re the result of systemic, unethical behaviour that has gone unchecked for too long. There must be consequences,” he said.
