Our voice in the world
5 June 2008
Aiming at tomorrow today
1 April 2008
Change in Canberra indicates opportunity
1 February 2008
Celebrating 25 years of NIBA
1 October 2007
Fighting the good fight for brokers and clients
1 August 2007
Noel Pettersen, Chief Executive of NIBA,
Insurance & Risk Professional, August 2007
While the significance of insurance in modern economies is unquestioned, the importance of brokers in the insurance market is often not well recognised. Similarly, lobbying governments on issues specific to insurance broking is neither easily understood, nor an easy thing to do.Yet this has been one of NIBA’s core roles over the years and we’ve certainly won far more battles than we’ve lost.
Insurance is one of the foundation stones of Australia’s sophisticated capital market. Without insurance coverage the private commercial sector would be unable to function in the way that it does today.
Insurance enables business to expand into unfamiliar territory, new locations, products and services. This is a critical element for sustained economic growth. Advancements in medicine, products and technology, such as space exploration, have become a reality because of insurance.
Insurance brokers are often thought of as middlemen who take a commodity manufactured by an insurer and sell it, as is, to the public. But this is an overly simplistic view. Brokers are often the developers and innovators of insurance and other risk management products.
Insurance brokers also facilitate the placement and purchase of insurance, provide services to insurance companies and consumers and complement the placement process. They ensure that the market works effectively, is competitive, well informed and has access to a wide variety of products and solutions.
This is why NIBA’s strong objections to the proposed legislation relating to the regulation of direct offshore foreign insurers (DOFIs) are so integral to insurance buyers.
NIBA continues to support the principle of protecting insurance consumers against poorly capitalised foreign insurers operating from low or non-existent regulatory regimes.
What’s proposed is that Australian-based brokers’ clients will have to insure with APRA-authorised insurers, but will not be prevented from doing business directly with any offshore insurers (either face to face or over the internet).
But there’s a catch. AFS licensees, including insurance brokers, will not be allowed to “arrange or deal in” offshore insurers’ products. In effect, this will sideline local insurance brokers from overseas insurance transactions undertaken by clients and will severely hamper normal commercial insurance arrangements.
For obvious reasons, NIBA has been lobbying hard on this issue with all the key stakeholders, including APRA, Treasury and the Minister Assisting the Treasurer, the Hon Peter Dutton. To present our case in the best possible way, it’s been essential to have the professional support of important players in the market, specifically international broker members who can articulate the impacts of issues involved because they are close to the action on behalf of their clients.
For some years now NIBA’s contention has been to rid the industry of the “shonky players” and the Government is to be congratulated on its aim to do this in a manner that is fair and equitable to all concerned.
Our worry is that this will not be achieved under the current proposals. Remember when the market was much tougher just a few years ago? Local insurers restricted the availability of some specialist cover or made it prohibitively expensive. Indeed, the only place some insurance cover could be accessed was through DOFIs.
A key issue is whether large corporations and sophisticated buyers will be able to buy insurance through a broker where it suits them in the future, without having to purchase solely through Australian local insurers who are pushing for the reforms. To legislate otherwise is counter-productive to the broker’s role and value proposition – to advise and place insurance on behalf of their clients that best suits clients’ risks and needs.
NIBA is lobbying hard for a solution that causes minimum disruption to the workings of the market or burdens the industry with unnecessary costs or “red tape”. Whatever answer the Government comes up with must not adversely impact competition. This means insureds would have to pay more or retain more risk to their own balance sheet because coverage is not as competitive.
We’ve been told that it’s not the Government’s intention to attack the role of insurance brokers or to restrict normal commercial insurance arrangements. The Government has indicated its willingness to work with NIBA and other parties to sort out a realistic system. However, many will be affected by this legislation and NIBA will continue to represent the interests of brokers and their clients to ensure they are not disadvantaged.
If the Government continues to pursue its insular approach to prevent insurance brokers from accessing overseas markets, NIBA is proposing that the legislation only apply to a clearly defined market segment that, in reality, needs protection. Basically, this means individuals and small business, similar to the distinction between wholesale and retail clients already in place.
Resolution of the DOFI question is a tough nut to crack. We value the support of those members who have provided hands-on assistance in the preparation of detailed submissions on the DOFI issue and attendance at many meetings.
This is just one of the many issues that NIBA has championed over the years on behalf of insurance buyers. It was rewarding recently to learn that the Victorian Government has dropped its plans to impose a further fire services levy on businesses with a total insured value of more than $50 million. NIBA and some of its members had many meetings with key decision makers in Victoria and we’ve made robust submissions pointing out that the proposal was unworkable and an unfair business impost.
In the end common sense has prevailed and we’ll continue to fight hard on the imposition of all unfair taxes on insurance.
We’re here for the long haul, so get behind us for the good of your clients.