NIBA has welcomed the report from the IBCCC review of the role of insurance brokers in arranging insurance premium funding for their clients
The National Insurance Brokers Association (NIBA) has welcomed the report from the Insurance Brokers Code Compliance Committee (IBCCC) following their review of the role of insurance brokers in arranging insurance premium funding for their clients.
The IBCCC has released the findings of its Own Motion Inquiry into whether and how Code subscribers use premium funding contracts, how the premium funding contract is explained to the client and the processes in place for dealing with clients in financial difficulty.
NIBA CEO Dallas Booth said, “We are pleased the Committee found many positives and numerous examples of good practice.”
The Code Committee has indicated that although such contracts are separate to insurance policies and generally issued by a third party, this area has emerged as a potential area of concern for clients experiencing financial difficulty.
Booth said, “The issue of clients becoming financially vulnerable when they face financial difficulty is critically for broker clients, just as it is for insurance policyholders more broadly. NIBA has recognised this in the work it is doing in relation to the review of the Insurance Brokers Code of Practice. NIBA also recognises the important work undertaken by the Insurance Council of Australia for the General Insurance Code of Practice, and welcomed the leadership taken by insurers in this area in their new Code.”
The Committee’s inquiry was based on data supplied by 260 subscribers to the Code in the 2019 Annual Compliance Statement, and in follow-up discussions with 31 subscribers. The Committee also examined the websites of premium funding companies to see if they publish financial hardship policies.
Booth added, “While insurance brokers invariably treat the interests of their clients as paramount, the work of the Committee in identifying good industry practice is welcome. This gives broking firms some good information on which to benchmark their operations and to identify potential areas for improvement where warranted.”
You can view a copy of the report here.
With 95 per cent of subscribers offering this model to clients, mainly through third-party suppliers, the Code Committee has indicated that they gained significant insight into the role brokers play as both intermediary and advocate in the relationship between client and funder. The Code Committee has noted that brokers are in an ideal position to represent each party when cases of financial difficulty arise.
Around two-thirds of subscribers reported providing training to staff about identifying and responding to clients with financial difficulty, mostly completed ‘on-the-job’ rather than training of a formal specialised nature.
The Code Committee has recommended that training related to premium funding is delivered regularly, is versatile and matches the needs of the brokers involved. It also advised that specific training be implemented to help staff identify financial difficulty triggers, and that this be supported with policies and procedures. The Code Committed has stated that it is essential that Code subscribers work proactively with clients to understand their needs.
Recommendations for effective communication include explaining the model; making the third-party arrangement clear; ensuring the client knows the arrangement includes the risk of the insurance policy being cancelled if payments are missed; and, being flexible in how information is delivered.
Other important recommendations in the report address staff awareness of premium funder hardship policies and communicating these to clients; making it easy for clients to access information about financial difficulty; encouraging funders to proactively address financial difficulty; and, brokers familiarising themselves with the Australian Finance Industry Association (AFIA) Insurance Premium Funding Code of Practice when it comes into effect (read more here).