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Commission disclosure ... what next after the election?

Commissions paid to insurance brokers are likely to come under the microscope if the ALP wins this Saturday’s federal election.

 

By Noel Pettersen, CEO of NIBA

This Saturday, voters go to the Australian polls to elect a new government, or retain the incumbent Labor party. By all accounts the final results will be very, very close, with NSW and Qld voters seemingly holding the key. It is not NIBA’s role to comment on electoral campaigns, however we are paying close attention to one particular issue that could be influenced by the election result: that of commissions paid to insurance brokers.

By way of background, it was the then Howard Government that introduced major reforms to the financial services sector with the Wallis Report which culminated in the Financial Services Reform Act, as we now know it. Over recent years under Labor, there has been a major focus on the investment sector, particularly as a result of the collapse of Westpoint, Storm Financial and Opus Prime.

There has been little action in relation to the insurance broking industry, with the Minister, Nick Sherry, declaring that “brokers did not rate on the top 50 issues within his jurisdiction”.  He and his Government acknowledged that NIBA had taken its members down the prudent path of constructive reform and, as a result, insurance brokers were well ahead of the game. On reflection, not a bad place to be.
 
However, in April this year, Financial Service Minister Chris Bowen released the Future of Financial Advice document which proposed a ban on contingency remuneration received by financial advisers that may be extended to insurance brokers for risk insurance produce (life and general). Bowen said that he had an open mind and that both sides of the argument were made with good intentions. NIBA continues to advise the current Government that it opposes any such extension to risk products.
 
NIBA is well prepared to go to battle on this issue once again, After all, we have been successful on every occasion that the government of the day has tried to act on commission received by intermediaries in the general insurance sector. We have already prepared a preliminary paper that substantiates our argument clearly, succinctly and forcefully. We will this circulate this document to members when appropriate.
 
No doubt the Gillard government will again take-up this issue if re-elected. NIBA understands that the Opposition has indicated that it does not support outlawing commission for risk insurance products and therefore will not support any change for risk insurance products. Whether this remains the case if Abbott is victorious remains to be seen.

I should emphasise that as a democratic industry association that represents the interests of our varied membership base, we do not make party donations or choose to align our thinking with one party or the other. It is our job to work with the government of the day and it is up to each individual to make a choice based on whomever they feel will better lead the country over the ensuing electoral term.
 



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