Terms of Engagement template – Insurance Brokers Code of Practice

The Terms of Engagement is a great opportunity to outline up front to your new clients, the services you will provide, and how you will be remunerated for those services.

The Insurance Brokers Code of Practice comes into effect on 1 November 2022. As part of the new Code obligations, Subscribers are required to provide information to their clients setting out the terms of engagement, prior to undertaking any work on the client’s behalf.

The information provided to clients must include;

• the scope of the agreed services required;
• whether we will provide advice based on personal circumstances or not;
• how the Subscriber intends to seek quotations from insurance companies; and
• details about any remuneration the Subscriber may earn by arranging insurance policies and/or providing advice on insurance cover.

The requirement assists Subscribers in ensuring important information is provided upfront in an easily accessible document. This is consistent with the findings of a number of reports that state most clients do not read the Financial Services Guides that brokers are required to provide.

To assist Subscribers in meeting this obligation, NIBA has developed a Terms of Engagement template that Subscribers can customise to better reflect the services their businesses provide. This template has been included in an updated Letter of Appointment and as a stand-alone document.

Subscribers may continue to use the Letter of Appointment for all new clients however, where a Terms of Engagement is provided to an existing client, Subscribers should use the stand alone Terms of Engagement template. NIBA notes that although the Letter of Authority requires a client signature, the Terms of Engagement does not need to be signed by the client.

Subscribers who currently provide a Terms of Business Agreement or similar document to their clients may wish to include the areas covered by the Terms of Engagement in their existing documentation to limit the number of documents provided to their clients.

Please note, the Terms of Engagement does not need to be signed and is only required for new clients, though it would be good practice to deliver to existing clients. Please refer to the current version of the Code on the NIBA website. Members can also access template documents and the Code Implementation Guide which contains valuable information on how the Code can be implemented in your business. The Code and accompanying guide are living documents. As such, NIBA will continue to update both in response to member feedback, and changes in industry best practice and consumer expectations.