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General Insurance broker commissions & informed consent – are you ready?

General insurance products are excluded from the conflicted remuneration obligations in respect of monetary or non-monetary benefits. However, from 9th July 2025, where personal advice is provided, or is likely to be provided, on general insurance products, the exclusion for monetary benefits only applies if the client’s informed consent to the monetary benefit has first been given. Refer: Corporations Act s963B(1)(a), s963BB, s963C(1)(a), and reg 7.7A.12G. Also refer ASIC RG 246 and INFO 292. what are the requirements? If you are a general insurance broker holding an AFS licence (or an [authorised] representative of a licensee) that receives monetary benefits (e.g. commissions) in connection with issuing or selling general insurance to a retail client while providing, or being likely to provide, personal advice to that client, you must: – obtain the client’s informed consent to receive the benefit before the insurance is issued or sold; – have the client’s written consent (or a copy of it), or a written record of any verbal consent that the client gave, and – as soon as practicable after the client provided informed consent, give the client a copy of the written consent, or a copy of the written record of the client’s verbal consent what does this mean in practice? The informed consent requirement applies to monetary benefits received by brokers from insurers (including underwriting agencies & Lloyds coverholders) given in connection with general insurance issued or sold after 9th July 2025 (including renewals after that date). if a broker is an authorised representative, the obligation applies to you in your capacity as an authorised representative. personal advice is financial product advice where the broker has considered one or more of the clients objectives, financial situation and needs or a reasonable person might expect the broker to have considered one or more of those matters. All other financial product advice is general advice. The informed consent requirement does not apply to monetary benefits given in connection with insurance issued or sold by AFS licensees and representatives if only general advice is provided or likely to be provided. If the situation involves both general advice and personal advice, the informed consent requirement applies to these benefits. The informed consent requirement does not apply to the giving of non-monetary benefits (e.g. education and training) to AFS licensees or representatives in connection with issuing or selling insurance. Note that AFSL general obligations ‘efficient, honest & fair’ and ‘conflicts of interest’ would apply to these arrangements especially if they are used to ‘disguise’ otherwise commission payments. This would also be misleading or deceptive conduct. If you are paid a monetary benefit without obtaining informed consent from your client, the monetary benefit you receive will breach the ban on conflicted remuneration. The consequences of breaching this ban could include a civil penalty, a banning order, or AFS licence suspension or cancellation. what must be provided to the client before they provide informed consent? Before a client can provide informed consent, you must disclose the following information to them: […]
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Managing compliance in General Insurance through obligations and key controls

‘Documentation helps you demonstrate whether or not you are complying with the general obligations.’ – ASIC RG 104.26 Insurers, underwriting agencies, TPAs, Lloyds coverholders, insurance brokers and claim service suppliers have a myriad of obligations to comply with. Compliance with your obligations, through your processes, procedures, systems and people are collectively known as your ‘compliance measures‘. Your compliance measures, together with your governance mechanisms, should work as an operating rhythm that manages your obligations in a systematic manner, incorporates changes, evolves as your business grows and responds to the external environment. The Risk & Compliance Manuals that I design and are tailored for my general insurance clients achieve this purpose, through the following: 1. Identifying the source of your obligations The source of your obligations are defined by: Who you are ? – an APRA regulated insurer holding an ASF Licence and who subscribes to the GI Code has different obligations to a NIBA insurance broker who is an authorised representative of a Licensee. Who do you act on behalf of? an underwriting agency or material service provider acting on behalf of an insurer or an insurance broker acting on behalf of a client? What do you do? – provide financial advice, issue general insurance products, provide a claims handling service or are a claims service supplier to an APRA regulated insurer How do you do it? – do you distribute direct or through brokers, do you sell through human interaction or automated processes, do you provide claims under your licence or through a TPA? Who are your clients? – retail or wholesale clients , consumer insurance contract or other insurance contracts. standard form contracts 2. Capture your obligations For my smaller-medium sized clients I capture obligations within their Risk & Compliace Manual, providing a single source document. Larger clients usually have a stand-alone obligations register. The manual or register should also include the source of the obligations (e.g., Section 912A(1)(a) Corporations Act or paragraph 21 GI Code of Practice), this enables the reader to deep-dive into the actual obligation when required. 3. Assign key controls This is the heart of ensuring your compliance measures are adequate. Key control(s) are assigned to each obligation, so that the obligation is managed within risk appetite. The focus of the Board, Senior Managers and Risk & Compliance Committee now shifts from the numerous obligations to a suite of more manageable key controls. 4. Test your key controls A key control that is not periodically tested is no control. Testing should incorporate (1) design effectiveness – is it fit for purpose? and (2) operational effectiveness – is it operating as intended? Gaps must be identified, reported and closed out in a timely manner. The gaps must be assessed for regulatory or Code breaches. You must have a control testing program. 5. Monitoring and reviewing your compliance measures Your compliance measures must be monitored on an ongoing basis. An effective risk & compliance operating rhythm generates data – incidents, complaints, control testing, file reviews, attestations, […]
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Responsible Managers in General Insurance – your obligations

The obligation One of the general obligations for AFS Licensees under Section 912A(1) Corporations Act is the ‘organisational competence obligation’. s912A(1)(e) ASIC assesses your compliance with this obligation by looking at the knowledge and skills of the people who manage your financial services business. ASIC refer to these people as your ‘responsible managers’. (refer RG 105) This is on ongoing obligation therefore it is important that your compliance measures, including how you comply with your obligations, are documented. How many responsible management should we nominate? At a minimum, you need to nominate responsible managers who: (a) are directly responsible for significant day-to-day decisions about the ongoing provision of your financial services; (b) together, have appropriate knowledge and skills for all of your financial services and products; and (c) individually, meet one of the five options for demonstrating appropriate knowledge and skills (refer Table 1 of RG 105). If you have a responsible manager with appropriate knowledge and skills for some, but not all, of your financial services or products, you need to ensure that your other responsible managers have appropriate knowledge and skills for the remaining services and products. The number of people you need to nominate as responsible managers will depend on the nature, scale and complexity of your business. However, ASIC expects that you will nominate at least two responsible managers. If you are heavily dependent on the competence of one or two responsible managers (e.g. in a small organisation with one or two principals), ASIC will generally impose a ‘key person’ condition on your AFS licence. Telling ASIC about your responsible managers You must demonstrate your organisational competence when you apply for an AFS licence. You may also need to demonstrate your organisational competence if you later apply to vary your licence authorisations. When you apply for an AFS licence, or to vary your licence authorisations, you must nominate your responsible managers in your application and answer questions about their role, training and experience, and which of the five options in they meet. You must also support your application with a ‘core proof’ demonstrating that your responsible managers: (a) individually meet one of the five options for demonstrating appropriate knowledge and skills; and (b) together have appropriate knowledge and skills to cover all of your financial services and products You must advise ASIC within 10 Business Days when you remove or add a responsible manager, refer the following link Changing your responsible managers If the responsible manager you are changing is named on your AFS licence as a key person, you must also apply to vary the key person condition on your licence. (Form FS03) If you need assistance with adding/removing responsible managers or varying your AFS Licence conditions, contact me. Obligations of a responsible manager The obligation for organisational competence applies to the licensee not the responsible manager with civil penalties applying for non-compliance however responsible managers may be subject to banning or disqualification orders for failing to fulifill their duties. The following cases are relevant […]
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𝗧𝗼𝗽 𝟱 𝗶𝗻𝗳𝗹𝘂𝗲𝗻𝗰𝗲𝘀 𝗼𝗻 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗶𝗻 𝟮𝟬𝟮𝟯 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝘆

Today’s list covers the top 5 groups that influenced compliance for the insurance industry during 2023. 𝗡𝗼. 𝟱 𝗜𝗻𝘀𝘂𝗿𝗲𝗿𝘀 APRA-regulated insurers make it onto my list due to a number of factors. With substantial resources (particularly the larger insurers), insurers have the internal numbers to implement complex & robust compliance arrangements, this sets expectations & a benchmark for best practice; Given insurers dominate the insurance landscape, especially retail insurance, the focus of regulators & industry bodies is always on Suncorp, IAG, QBE, Allianz, Hollard et al Insurers in turn drive the compliance measures at MGAs & TPAs. Due to FAR & CPS 230, this will continue into 2024/25 extending to insurance brokers. 𝗡𝗼 𝟰. 𝗜𝗻𝗱𝘂𝘀𝘁𝗿𝘆 𝗯𝗼𝗱𝗶𝗲𝘀 The Insurance Council of Australia, CGC, National Insurance Brokers Association (NIBA) & IBCCC continue to heavily influence & drive compliance positions across the industry. In addition, Insurtech Australia & Underwriting Agencies Council (UAC) have also been leading the way in respect of technology & the emergence of underwriting agencies. 𝗡𝗼 𝟯. 𝗜𝗻𝗱𝘂𝘀𝘁𝗿𝘆 𝗖𝗼𝗱𝗲𝘀 The GI Code of Practice has always been a heavy influence on the compliance programs for insurers (& MGAs & TPA’s) however the Insurance Brokers Code of Practice has been remarkable in driving the compliance focus for insurance brokers. This has been particularly evident for brokers with large Authorised Representative networks. 𝗡𝗼 𝟮. 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘀 ASIC, Australian Prudential Regulation Authority &, while technically not a regulator, Australian Financial Complaints Authority have continued to have a strong influence on compliance across the insurance industry. From taking Federal Court action on pricing promises to shutting down an insurer & its underwriting agency partners for 24 hours due to a defective TMD to CPS 230 & AFCA determinations, the regulators continue to set the direction & focus on compliance for the insurance industry. 𝗡𝗼 𝟭 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗣𝗲𝗼𝗽𝗹𝗲 🏆 🥇 The Gold Medal for 2023 in successfully driving compliance are the unsung heroes – people, specifically the person(s) within each organisation who drives & champions compliance. The better compliance people manage to find the right balance between compliance & business & focus their efforts on raising internal awareness, training & education. The Compliance Champions for 2023 and the top influencers on Compliance within the Insurance industry for 2023 are our wonderful compliance people.
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𝗔𝗦𝗜𝗖 𝗹𝗲𝘁𝘁𝗲𝗿 𝗰𝗮𝗹𝗹𝘀 𝗼𝗻 𝗶𝗻𝘀𝘂𝗿𝗲𝗿𝘀 𝘁𝗼 𝗶𝗺𝗽𝗿𝗼𝘃𝗲 𝗰𝗹𝗮𝗶𝗺𝘀 𝗵𝗮𝗻𝗱𝗹𝗶𝗻𝗴 𝗽𝗿𝗮𝗰𝘁𝗶𝗰𝗲𝘀

ASIC has issued a letter reminding general insurers of their obligations as Australian financial services (AFS) licensees when handling insurance claims, especially in response to severe weather events. (ASIC’s letter was published on 6th March 2024). The letter sets out the obligations general insurers have as AFS licensees under the Corporations Act 2001 (Cth). General insurers are required to act efficiently, honestly, & fairly when providing claims handling services: see section 912A. This includes resolving claims in a timely manner, especially when responding to claims relating to severe weather events. Insurers are required to: – communicate transparently, clearly & in a timely way with consumers regarding their claims – effectively project manage third parties, including assessors & tradespeople – identify complaints and expressions of dissatisfaction at the earliest opportunity – recognise consumers experiencing vulnerability & tailor their claims handling service accordingly, & sufficiently resource claims handling & dispute resolution functions, & ensure staff are adequately trained. Insurance claims handling is an enforcement priority for ASIC in 2024. ASIC is monitoring claims handling through reports of misconduct made directly to ASIC, any systemic issues reported by AFCA, and regular contact with consumer groups assisting people with claims & related disputes. ASIC’s message is they are watching how insurers support their customers very closely. Evidence of significant misconduct identified through these channels may result in enforcement action. 𝘾𝙤𝙢𝙥𝙡𝙞𝙖𝙣𝙘𝙚 𝙧𝙚𝙫𝙞𝙚𝙬 𝙤𝙛 𝙘𝙡𝙖𝙞𝙢𝙨 𝙝𝙖𝙣𝙙𝙡𝙞𝙣𝙜 𝙥𝙧𝙖𝙘𝙩𝙞𝙘𝙚𝙨 It may be prudent to conduct a compliance review of your claims handling & settling practices including service suppliers. The review should also cover GI Code of Practice obligations. A compliance review assesses the adequacy of your compliance arrangements to manage AFSL & Code obligations & provides solutions adopting a risk-based approach. Underwriting Agencies with AFSL claims authorisation & Insurance Claims Managers (TPA) should also consider a compliance review. Contact me to explore how I can assist.
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𝐀𝐝𝐯𝐞𝐫𝐭𝐢𝐬𝐢𝐧𝐠 𝐆𝐞𝐧𝐞𝐫𝐚𝐥 𝐈𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐩𝐫𝐨𝐝𝐮𝐜𝐭𝐬 & 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬

As a compliance specialist, I always read adverts from insurers, underwriting agencies, insurance brokers etc I analyse the inherent compliance risk arising from the advertisement. 𝙈𝙞𝙨𝙡𝙚𝙖𝙙𝙞𝙣𝙜 𝙤𝙧 𝙙𝙚𝙘𝙚𝙥𝙩𝙞𝙫𝙚 𝙘𝙤𝙣𝙙𝙪𝙘𝙩 Advertising gives rise to the risk of engaging in misleading or deceptive conduct. Generally speaking, misleading or deceptive conduct leads a person into error. Engaging in Misleading or deceptive conduct is a reportable situation to ASIC. ASIC’s regulatory guide RG 234, helps licensees & promoters comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct. 𝙂𝙤𝙤𝙙 𝙋𝙧𝙖𝙘𝙩𝙞𝙘𝙚 𝙂𝙪𝙞𝙙𝙖𝙣𝙘𝙚 RG 234.16 contains an overview of ASIC’s good practice guidance for advertising in all media: Returns, features, benefits & risks – a balanced message between benefits & risks should be provided. Benefits should not be given undue prominence compared with risks; Warnings, disclaimers, fine print & qualifications should not be inconsistent with other content in an advertisement, including any headline claims; Where a fee or cost is referred to in an advertisement, it should give a realistic impression of the overall level of fees & costs a consumer is likely to pay, including any indirect fees or costs; Comparisons should only be made between products that have sufficiently similar features or, where an advertisement compares different products, the differences should be made clear in the advertisement; Past performance information should be accompanied by a warning that past performance is not indicative of future performance; Terms and phrases should not be used in a particular way by industry where these are not consistent with the ordinary meaning commonly recognised by consumers (e.g. ‘free’, ‘secure’ & ‘guaranteed’); Advertisements should be capable of being clearly understood by the audience that might reasonably be expected to see the advertisements; Where an advertisement draws attention to specific product features, the advertisement should be consistent with information contained in any disclosure document (such as a PDS); Photographs & images should not contradict, detract from or reduce the prominence of any warnings, disclaimers or qualifications; & Advertisements for a financial advice service should not create unrealistic expectations about what the service can achieve. In certain media, adverts must refer to the PDS & TMD 𝙊𝙫𝙚𝙧𝙖𝙡𝙡 𝙞𝙢𝙥𝙧𝙚𝙨𝙨𝙞𝙤𝙣 𝙤𝙛 𝙩𝙝𝙚 𝘼𝙙𝙫𝙚𝙧𝙩 Assessing the overall impression is important. ASIC considers the following factors: a) the subject; b) the content; c) the format; d) the audience; e) the media used; & f) the likely effect of the advertisement
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𝗪𝗵𝗲𝗻 𝗱𝗼 𝗜 𝗽𝗿𝗼𝘃𝗶𝗱𝗲 𝗮 𝗙𝗦𝗚, 𝗣𝗗𝗦….

A common question I’m asked is the timing to provide disclosure documents & other notices. The source of the obligation – Act, Regs or Code includes the timing & content requirements for each document & by whom & to whom provided. The requirements depend on the type of client (retail or wholesale), what you do & who you represent (broker representing an insured or MGA/TPA representing an insurer, or an insurer). 𝗦𝘂𝗺𝗺𝗮𝗿𝘆 𝑭𝑺𝑮 An AFS Licensee or their AR must give a FSG to a retail client as soon as practicable after it becomes apparent that a financial service will be provided to that client & before a financial service is provided. It is industry best practice to provide an FSG to wholesale clients. Insurance brokers should be aware that an FSG may be given after the services have been provided in ‘time critical’ cases such as an impending policy due date (4pm). Brokers can also provide the ‘Terms of engagement’ (part 4.2 Brokers Code) at the same time as providing an FSG. Insurance Claims Managers do not need to provide an FSG (as they act for insureds) but Claimant Intermediaries must. 𝗦𝗢𝗔 A Statement of Advice must be provided where personal advice is provided to a retail client for sickness & accident & CCI insurance products. The SOA must be provided when or as soon as practicable after providing the advice. 𝗚𝗲𝗻𝗲𝗿𝗮𝗹 𝗮𝗱𝘃𝗶𝗰𝗲 𝘄𝗮𝗿𝗻𝗶𝗻𝗴 A GAW must be provided at the same time & in the same format as when general advice is provided to retail clients. If the GA is provided on a website or in a document the GAW must be included. 𝑷𝑫𝑺 Generally, a product issuer (insurer or MGA) must provide a PDS to a retail client when making an offer (quote) or sale. A broker should ensure a PDS is provided when making a recommendation to a retail client to buy an insurance product. 𝑻𝑴𝑫 A TMD must be made publicly available before any person distributes a financial product that is subject to the design & distribution obligations ie ‘retail product distribution’. Generally the TMD is available on issuers websites with links provided in relevant documents. 𝑪𝒂𝒔𝒉 𝑺𝒆𝒕𝒕𝒍𝒆𝒎𝒆𝒏𝒕 𝑭𝒂𝒄𝒕 𝑺𝒉𝒆𝒆𝒕 & 𝑪𝒐𝒏𝒇𝒊𝒓𝒎𝒂𝒕𝒊𝒐𝒏 𝒐𝒇 𝑻𝒓𝒂𝒏𝒔𝒂𝒄𝒕𝒊𝒐𝒏𝒔 A CSFS must be provided by insurers (or TPA) to retail clients before a cash payment is made where there are other legally available options to settle the claim. A CoT must be provided as is reasonably practicable after the transaction with the retail client occurs & includes acceptance & settlement of an insurance claim. A CSFS may be provided up to 5 days after the payment in cases of ‘immediate need’. A CSFS or CoT is not required in family violence situations. 𝑼𝑭𝑰 Brokers must provide a written notice to a client when placing business with an Unauthorised Foreign Insurer when relying upon 1 of the 4 exceptions. Contact me to understand all your disclosure & notices obligations.
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𝗠𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝘁𝗵𝗲 𝗰𝗼𝗺𝗽𝗹𝗲𝘅𝗶𝘁𝘆 𝗼𝗳 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲

The regulatory regime for providing insurance products & services in Australia is complex. Financial services laws, ASIC Reg Guides, APRA Prudential Standards, GI & Brokers Code of Practice, and Agreements (binder, agency, distribution & claims) create a plethora of obligations with severe consequences for non-compliance. The primary purpose of compliance is to protect. Protect the business, its people, customers & other key stakeholders. How do you ensure that you achieve this purpose & not get pulled down the ‘tick-a-box checklist’ pathway that creates a multitude of rules, instructions & documents? Here are some tips to effectively & efficiently manage the complexities of compliance: 𝙎𝙮𝙨𝙩𝙚𝙢𝙖𝙩𝙞𝙘 𝙖𝙥𝙥𝙧𝙤𝙖𝙘𝙝 Compliance management requires an operating rhythm. Adopting a systematic approach to compliance ensures that your compliance measures provide optimum protection to the business, its people & customers. 𝘾𝙡𝙚𝙖𝙧 𝙧𝙤𝙡𝙚𝙨 & 𝙧𝙚𝙨𝙥𝙤𝙣𝙨𝙞𝙗𝙞𝙡𝙞𝙩𝙞𝙚𝙨 Clarity around roles & responsibilities creates accountability. It also drives efficiencies & avoids gaps or duplication. Typically, the business performs the compliance task & activities while risk & compliance functions (or a risk & compliance committee) provide monitoring & oversight. 𝙀𝙙𝙪𝙘𝙖𝙩𝙞𝙤𝙣 & 𝙖𝙬𝙖𝙧𝙚𝙣𝙚𝙨𝙨 Compliance is complex, and training is essential. The training for employees & Authorised Reps must be practical, business-focused & lead people to understand why they should care. Caring results in doing. 𝙏𝙝𝙚 𝙙𝙤𝙞𝙣𝙜 A well-crafted document doesn’t provide protection. The protection comes from people reporting incidents, breaches & complaints; from undertaking compliance training in a timely fashion; from following systems & procedures & with a genuine desire to play their part in protecting the business, colleagues & customers. 𝙈𝙤𝙣𝙞𝙩𝙤𝙧𝙞𝙣𝙜 & 𝙨𝙪𝙥𝙚𝙧𝙫𝙞𝙨𝙞𝙤𝙣 ‘You can’t see the forest for the trees’. Successful compliance arrangements include those who are doing with an added layer of protection provided by monitoring & supervision. There needs to be a degree of independence between doing & oversight. 𝘿𝙖𝙩𝙖 & 𝙧𝙚𝙥𝙤𝙧𝙩𝙞𝙣𝙜 A systematic approach to compliance produces data, lots of data. To be meaningful, this data must be analysed. To be valuable, this data must be reported. A systematic approach to compliance includes the use of data to validate the health of the compliance arrangements. 𝙀𝙫𝙞𝙙𝙚𝙣𝙘𝙚 𝙗𝙖𝙨𝙚𝙙 Effective documentation helps to educate, raise awareness & demonstrate whether or not you are complying with your obligations. Documentation also provides a transparent benchmark for accountability. 𝙍𝙞𝙨𝙠 & 𝘾𝙤𝙢𝙥𝙡𝙞𝙖𝙣𝙘𝙚 𝙂𝙤𝙫𝙚𝙧𝙣𝙖𝙣𝙘𝙚 The combination of the above elements provides good Governance ensuring that compliance is protected. Contact me should you need assistance with your Compliance measures.
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𝗠𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝗰𝗼𝗻𝗳𝗹𝗶𝗰𝘁𝘀 𝗼𝗳 𝗶𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗶𝗻 𝘁𝗵𝗲 𝗜𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝘆

𝑻𝒉𝒆 𝒐𝒃𝒍𝒊𝒈𝒂𝒕𝒊𝒐𝒏 AFS Licensees must have in place adequate arrangements for the management of conflict of interest (s912A(1)(aa) Corps Act). Conflicts of interest are circumstances where some or all of the interests of people (clients) to whom a licensee (or its representative) provides financial services are inconsistent with, or diverge from, some or all of the interests of the licensee or its representatives. This includes actual, apparent & potential conflicts of interest. (RG 181.15) 𝙏𝙮𝙥𝙞𝙘𝙖𝙡 𝙘𝙤𝙣𝙛𝙡𝙞𝙘𝙩𝙨 𝙤𝙛 𝙞𝙣𝙩𝙚𝙧𝙚𝙨𝙩 𝙩𝙝𝙖𝙩 𝙢𝙖𝙮 𝙖𝙧𝙞𝙨𝙚 𝙬𝙞𝙩𝙝𝙞𝙣 𝙩𝙝𝙚 𝙞𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙞𝙣𝙙𝙪𝙨𝙩𝙧𝙮 Some of the typical conflicts that may arise include: – commissions & non-monetary remuneration paid by the issuer of the products (insurers/MGAs) to insurance brokers. Insurance Brokers act on behalf of the insured (refer s11 Insurance Contracts Act & Part 6.0 Insurance Brokers Code of Practice) – having equity or common directors in a brokerage & underwriting agency; – a claims handler or underwriter having a family or personal relationship with the claimant/broker/insured; – having an interest in an outsourced provider; – providing insurance broking services to 2 clients who contract with each other; – receiving gifts or entertainment from a service supplier, insurer etc 𝙈𝙖𝙣𝙖𝙜𝙞𝙣𝙜 𝙩𝙝𝙚 𝙘𝙤𝙣𝙛𝙡𝙞𝙘𝙩 The requirement is to adequately manage the conflict. The three mechanisms that licensees would generally use to manage conflicts of interest are: (a) controlling conflicts of interest; (b) avoiding conflicts of interest; & (c) disclosing conflicts of interest Controlling conflicts of interest include: – passing the file to a colleague or another firm to manage & putting in place ‘ethical walls’; – adhering to the firms policies & procedures. This means an underwriter would follow their underwriting guidelines when managing a conflict for eg with a broker; similarly a claims handler would follow the claim guidelines where there is a personal relationship & a broker adhering to internal guidelines for commissions; – dealings with related companies would be conducted at arms-length & on commercial terms. Disclosing (to the parties) – this is commonly via a disclosure document (FSG) or on the website (stating who you act for); – raising & recording on the conflicts or gifts & entertainment register with a senior person sign-off; Avoiding If the conflict can’t be adequately managed through controls or disclosure then it must be avoided. 𝘿𝙤𝙘𝙪𝙢𝙚𝙣𝙩𝙚𝙙 𝙚𝙫𝙞𝙙𝙚𝙣𝙘𝙚 It is best practice to document your approach to managing conflicts in a manual or policy & maintaining a conflicts of interest &/or gifts & entertainment register. Staff & representatives must be trained If you would like assistance in implementing mechanisms to manage your conflicts reach out to me.
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𝗔𝗹𝗶𝗴𝗻𝗺𝗲𝗻𝘁 𝗼𝗳 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗼𝗯𝗹𝗶𝗴𝗮𝘁𝗶𝗼𝗻𝘀 𝘁𝗼 𝘁𝗵𝗲 𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝘀𝗮𝗹𝗲𝘀 𝗲𝘅𝗽𝗲𝗿𝗶𝗲𝗻𝗰𝗲

When speaking to clients who are concerned about the complexity of compliance, I advise aligning compliance obligations with the customer experience. This enables us to think about compliance in a logical, systematic manner. The risk of non-compliance, regulatory enforcement action & customer detriment is managed. 𝙏𝙝𝙚 𝙞𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙨𝙖𝙡𝙚𝙨 𝙥𝙧𝙤𝙘𝙚𝙨𝙨 – 3 𝙥𝙧𝙚𝙡𝙞𝙢𝙞𝙣𝙖𝙧𝙮 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 Answering 3 simple questions sets the signage for the customer sales pathway. 1. Is the client retail or wholesale? It is important to understand the disclosure documents & warnings that must be provided. This is a 2 step process. a) is the customer an individual or small business (as defined)? If yes, keep going, no = wholesale client b) does the product fall within s761G(5)(b) Corps Act as defined in Regs 7.1.11 – 7.117A? if yes = retail, if no = wholesale. 2. Is this a consumer insurance contract? This is important to determine whether the duty to take reasonable care not to make a misrepresentation or the Duty of disclosure applies. Either: a) falls within the definition of s11AB Insurance Contracts Act; or b) is deemed to be a consumer insurance contract by the insurer giving a written notice to that effect 3. Are you a Distributor (GI Code) or a [NIBA member] Insurance broker or AR of a broker (Brokers Code). This determines whether the standards & obligations of the relevant industry Codes apply to you during the sales process 𝙏𝙝𝙚 𝙘𝙪𝙨𝙩𝙤𝙢𝙚𝙧 𝙞𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙨𝙖𝙡𝙚𝙨 𝙥𝙧𝙤𝙘𝙚𝙨𝙨 Once you have the information, it is relatively easy to map compliance obligations to each stage of the customer insurance sales process As an example – a retail client for a consumer insurance contract & you are an insurance broker acting for an insured or in plain language, a new client asks about insurance for their home. 𝘼𝙩 𝙚𝙣𝙜𝙖𝙜𝙚𝙢𝙚𝙣𝙩 provide the client with: 1. Terms of engagement (Brokers Code) 2. FSG (AFSL requirement) 𝙉𝙚𝙚𝙙𝙨 𝙖𝙣𝙖𝙡𝙮𝙨𝙞𝙨 1. provide a warning – general or personal advice [AFSL] 2. understand the insurers or underwriting agency’s underwriting questions to respond to the insured’s duty to take reasonable care not to make a misrepresentation [Insurance Contracts Act] 3. Disclose $$ remuneration (or an estimate & the actual amount as soon as reasonably practicable) [Code] 4. ensure the client falls within the relevant TMD [AFSL] 𝙌𝙪𝙤𝙩𝙞𝙣𝙜 𝙨𝙩𝙖𝙜𝙚 1. Provide the PDS [AFSL] 𝙈𝙖𝙥𝙥𝙞𝙣𝙜 𝙩𝙝𝙚 𝙨𝙖𝙡𝙚𝙨 𝙥𝙧𝙤𝙘𝙚𝙨𝙨 There may be other obligations that arise during the sales process such as misleading or deceptive conduct, hawking etc however you can see that this is merely a case of mapping out the sales process & assigning the compliance obligation at each stage
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