Important Note

This article does not suggest that commissions are improper or criticise brokers who operate within the current legal and Code frameworks. Its purpose is to examine whether professional expectations concerning commission disclosure should extend beyond the requirements proposed for retail clients under the draft 2027 Code.

What is the issue?

The Independent Review of the Insurance Brokers Code of Practice, report December 2025 recommendation 3 provided:

Section 6.1 of the [draft] Code should oblige signatories to provide all individual and small business clients with remuneration disclosure regardless of the type of insurance product.

NIBA’s response, published 21 January 2026, stated

We support the principle of extending remuneration disclosure to all retail clients as defined under Section 761G of the Corporations Act 2001. This includes small business clients who fall within the statuteʼs retail client definition and will apply regardless of policy type.

NIBA did not adopt the reviewer’s broader proposal. Instead, it applied the statutory retail-client framework in section 761G, with an additional disclosure requirement for strata insurance.

For small business clients, the statutory approach means mandatory disclosure generally turns not only on the size of the business but also on whether the insurance product is one of the prescribed general insurance products treated as retail products under section 761G.

The draft 2027 Code adopted this position, other than for strata insurance, at section 7.1:

We must disclose our remuneration:

• for general insurance products that are retail products under the Corporations Act 2001 (Cth), to every client who is an Individual or a Small Business and to whom we provide Covered Services; and
• for all strata insurance (both Residential Strata Insurance and Commercial Strata Insurance) for which we provide Covered Services, to the client, whether or not the client is a retail client under the Corporations Act 2001 (Cth)

For this purpose, the draft Code defines Small Business by reference to the test in section 761G:

A business that meets the small business test in section 761G of the Corporations Act 2001 (Cth). At the date of this Code, that means a business employing fewer than 20 people or, if the business is or includes the manufacture of goods, fewer than 100 people. If the law changes, the Corporations Act test as amended applies

Paragraph 7.1 is supplemented by paragraph 7.2

Any client can ask us to disclose our remuneration. This applies whether the client is retail, wholesale, strata or a business of any size

The inclusion of strata insurance was in response to the recent criticism of remuneration arrangements associated with strata insurance

The decision to restrict the disclosure of remuneration (specifically commission payments) to retail clients (other than strata) has met with criticism, including a view from the Quality of Advice reviewer Michelle Levy as reported in Insurance News 15 September 2026

Ms Levy told Insurance News:

“In my view a person who is a professional, acting in the best interests of their client, has an ethical obligation – if not legal obligation – to disclose all the remuneration they will receive.”

What is the scope of the issue?

Commission-based remuneration appears to remain particularly relevant in parts of the small and medium business market, although remuneration models vary significantly between brokers, client segments and placements.

The debate raises two questions:

1. Should the draft Code require proactive commission disclosure to small business clients even where they are classified as wholesale clients?
2. If so, should eligibility be determined by a fixed employee threshold, the client’s actual sophistication, or some combination of objective and risk-based criteria?

The viewpoints

AFCA’s position – August 2026 submission

AFCA advanced the following positions in its submission:

It should be noted these are AFCA’s recommended Code standards, not necessarily a description of the current statutory test.

1. AFCA recommends the draft Code expressly recognise that remuneration arrangements, including commissions, fees and non-monetary benefits, may create conflicts of interest that must be identified, disclosed and managed in the client’s best interests.
2. The approach in the 2014 standards – requiring subscribers to disclose remuneration and answer any questions – provided stronger consumer protection than section 7.2 of the draft Code
3. To improve disclosure under section 7, we believe the industry should develop templates after comprehensive consultation and consumer testing, and their use should be mandated in the Code.
4. AFCA strongly recommends that NIBA amend the draft Code’s definition of small business to align with AFCA Rules to enhance the protections of the Code to brokers’ key client base

IBCCC’s position – 7 August 2026 submission

1. Remuneration transparency is fundamental to informed decision-making, effective management of conflicts of interest and confidence in the insurance broking profession. The arguments provided by NIBA fail to support the lack of transparency in its approach
2. The Code should require brokers to proactively disclose all remuneration, including commissions and other financial benefits received in connection with the placement of insurance cover, to every individual and small business client, regardless of the type of insurance product.
3. A client’s interest in understanding how their broker will be paid should not depend on whether they are purchasing home, commercial property, strata or another form of insurance. Individual and small business clients should receive the same level of transparency regardless of the product they purchase.

Arguments supporting the draft Code’s approach

Those supporting the draft Code’s approach may argue that a universal disclosure obligation would impose additional administrative and compliance requirements without necessarily producing a meaningful benefit for every wholesale client. Wholesale clients vary considerably in size, sophistication and bargaining power, and some will already understand that brokers may receive remuneration from insurers.

The draft Code also does not prevent disclosure. It requires disclosure for retail and strata clients and permits any other client to request remuneration information. On this view, the combination of mandatory disclosure for protected cohorts, disclosure on request and the general obligation to manage conflicts represents a proportionate, risk-based approach.

It may also be argued that the central issue is not merely whether a commission exists, but the nature and significance of any conflict it creates and whether that conflict has been adequately managed.

Do brokers have an ethical obligation to disclose commissions?

The role of industry Codes is to provide standards of conduct and timeframes that operationalise the law or go beyond the law.

If proactive disclosure is considered an important professional expectation, the question then arises whether it should be expressed as an enforceable and consistently applied Code obligation.

A possible ethical framework

There is no single legal test that determines whether non-disclosure is unethical. Concepts such as honesty, fairness, good faith and the rejection of sharp practice nevertheless provide a useful starting point when considering community expectations of professional conduct.

An ethical framework that could be adopted by a broker is:

• Is the remuneration material to the client’s assessment of the broker’s recommendation?
• Could it reasonably be perceived as influencing the broker?
• Does the client understand how the broker is paid?
• Has the broker created an expectation that it acts solely or predominantly in the client’s interests?
• Would non-disclosure undermine informed consent or trust?

Agency and possible fiduciary obligations

An insurance broker will commonly act as the client’s agent in arranging insurance. Whether the broker also owes fiduciary obligations, and the scope of any such obligations, depends on the particular relationship, retainer and functions undertaken. It should therefore not be assumed either that every broker-client relationship is comprehensively fiduciary or that fiduciary obligations can never arise.

If a relevant fiduciary obligation applies, receipt of an insurer commission may engage the duties concerning conflicts and unauthorised profits. Full disclosure and the client’s properly informed consent may then be required, depending on the nature and scope of the fiduciary obligation. Whether disclosure of industry practice alone is sufficient would depend on what the client was actually told and understood.

Financial Services Laws

Section 912A requires an AFS licensee, subject to the statutory scope of the relevant obligations, to do all things necessary to ensure that financial services are provided efficiently, honestly and fairly and to maintain adequate arrangements for managing conflicts of interest. These obligations are not confined to retail clients.

They do not, however, create an express rule requiring every commission received in connection with a wholesale-client placement to be disclosed. Depending on the circumstances, adequate conflict management may involve avoiding the conflict, controlling it, disclosing it or adopting a combination of measures. Disclosure alone will not necessarily provide an adequate response to a conflict that should instead be avoided or more directly controlled.

The sophistication of the client may be relevant to how disclosure is communicated and understood, but it does not by itself determine whether the conflict has been adequately managed.

A risk-based approach also presents practical difficulties. Assessments of sophistication and understanding can be subjective, may be inconsistently documented and can be challenged with hindsight. A ‘hard and fast’ rule is easier to communicate, supervise and enforce, even if it produces disclosure in cases where the client already understands the remuneration arrangement.

Conclusion

In my view, it is too broad to say that every failure to disclose a commission to a wholesale client is necessarily unethical. The present legal and Code frameworks do not impose a universal proactive disclosure requirement, and wholesale clients differ substantially in size, experience, bargaining power and understanding of insurance remuneration.

Equally, regulatory classification should not be treated as conclusive evidence of sophistication. A small business may be classified as wholesale because of the product it purchases while having little understanding of insurance markets, broker remuneration or the conflicts that commissions may create.

The better approach, in my view, is risk-based. A broker should consider the nature and amount of the remuneration, the significance of any resulting conflict, whether the remuneration could influence, or reasonably appear to influence, the recommendation, and the client’s understanding of the remuneration arrangement. Client vulnerability and any material information imbalance may also be relevant. The more significant the conflict and the less informed the client, the stronger the case for clear, proactive disclosure.

An ethical concern is most likely to arise where a broker knew or reasonably ought to have known that the remuneration would be material to the client’s assessment of the recommendation or the broker-client relationship, but nevertheless chose not to disclose it. That is different from concluding that every failure to disclose a commission to a wholesale client is inherently unethical.

Whether the draft Code should translate this principle into a universal disclosure rule for small business wholesale clients is ultimately a policy question. A Draft Code rule would provide consistency, transparency and ease of supervision. A risk-based approach may be more proportionate, but it places greater reliance on professional judgement and would require clear guidance, appropriate records and effective oversight.

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