Address to 2024 NIBA Convention

21 October 2024

I am delighted to be here with you all today.

I would like to start by acknowledging the Kaurna (Gar-na) people as the traditional custodians of the lands and waters of the Adelaide region on which we meet today. I pay my respects to elders both past and present and extend that respect to all First Nations people here today. 

I will be talking today about what AFCA is seeing in the financial landscape. We have a unique perspective as to a single ombudsman scheme across the financial services sector.

The role of brokers has evolved in recent years to go beyond insurance. Your offerings have expanded to include a range of services such as due diligence audits, claims management and loss control.

You are a vital link in the chain between insurers and policyholders, responsible for placing just over half of the total insurance business each year.

Insurance broking is about building trusted relationships that empower clients to make informed decisions. You are an essential partner in safeguarding assets.

You provide expertise in an increasingly complex market, understanding the context of your customers and offering personalised advice that helps them navigate the world of insurance.

Insurance costs are proving increasingly challenging, and we know many people are reducing insurance or going without it altogether. The role you play in exploring insurance options and helping people find and retain the right cover for them or their business is more important than ever.

You also play a vital role advocating for and assisting clients through claims processes. This support can be invaluable during what is often a very challenging time. Aiming for an efficient and fair outcome for your clients.

My parents were small business owners. My Mum and Dad left school at 15. My Dad became a coal miner and my Mum sold Avon. They went on to run a corner shop for 40 years and my Dad wholesaled greengrocery. They weren’t experts on insurance and financial products like most small business owners. I saw firsthand the invaluable role insurance brokers can play in minimising complexity for them, allowing them to focus on the success of their business with the confidence that their investment and livelihood was protected. Their broker was viewed as a friend as well as a trusted professional partner. My brother worked for years as an insurance broker in the UK. I start from a standpoint of understanding your role and the value that insurance brokers can and do add.

The success of your business is not only linked to your approach and professionalism. It is also linked to the conduct and reputation of the insurance broking industry more broadly. Professionalism and fair outcomes are good for your customers and good for your business. A good professional reputation for the industry as a whole is equally important. That’s where the efforts of all members through NIBA and your industry Code of practice is important.

Last financial year, insurance brokers made up six per cent of AFCA members. Out of the more than 104,000 complaints referred to us, only 584 were about insurance brokers.

Compared to the more than 29,000 complaints about General Insurance we saw in the same year, your volumes are very small.

In fact, many of you in this room have never interacted with AFCA.

While you do not have the same volume of complaints as General Insurance, which have increased by 81% since AFCA’s inception, it would be a mistake to be complacent and we do see some common themes from the complaints that we do receive.

Some of these are very simple things to fix such as making sure you are providing your clients with up to date policy documents and keeping good business records to document the services you provide your clients. A key aspect of your service is acting in your clients’ best interests by checking to make sure a policy still meets their needs, rather than simply renewing it each year.

Other issues are more complex.

The most complained about issue for brokers is also the most complained about issue for General Insurers and that is about delays in claim handling. Fifteen percent of all complaints about brokers are about it taking far too long for your clients to receive a response to their claims submission. Now I know that this is not always due to delay on your part.

Still this is not good enough. It is an area in which you can help by improving how you communicate with your clients.

We think insurers can do better in relation to communication about unavoidable delays.

I encourage you all to review how you can help by keeping your clients up to date about the progress of their claim. If you know a claim is delayed due to unforeseen complexities, be transparent.

Be responsive and approach your communication with a customer-centric mindset.

Another more complex theme we have seen emerge is about the provision of a claims service to the standard required of a competent and experienced insurance broker.

The responsibility of a broker is to represent your client’s interests by advocating for policy entitlements and not merely acting as a mouthpiece for the insurer.

The reputation of your industry is being challenged in a very public way with issues of opaque and conflicted relationships as highlighted in the ABC’s recent Four Corners episode – the Strata Trap and subsequent reporting by the ABC. This is an issue that resonates deeply with people and they know its not right. This is not an issue that is just going to go away.

While I know not all brokers in this room deal with strata insurance, these issues pose a very real risk to the reputation of the entire industry.

The episode highlighted quite appalling conflicts between strata managers, brokers and insurers.

Off the back of that story, people within my own owners’ corporation were asking each other questions about whether the strata manager and insurance broker can be trusted, and whether there is a different way to operate. This will be happening up and down the country.

Most customers will not differentiate amongst you. The poor practices of some will have consequences for all of you.

The potential damage to the reputations of every person in the room is real because of the actions of a few.

All brokers must take this seriously and act to regain trust from consumers and rebuild the reputation of the industry. It will affect every one of you.

The Code can play an important role here. While it isn’t a panacea, it can help to effect change.

It’s important the industry backs up its public statements with action: If you’re keen on genuine disclosure and transparency, then your code needs to move forward with stronger, more progressive commitments from industry. It should never step back.

Following the Four Corners story, NIBA made a public statement which noted the importance of transparency. This needs to be followed by meaningful action.

Technical compliance with the law and what the court of public opinion deems as fair and ethical conduct can be entirely different. The industry must be attuned to this, in order to maintain and build confidence in the sector.

The law can be slow to catch up. This is where strong industry codes of practice are critical, setting professional and progressive conduct above the base level required by law.

A public commitment from you and the industry about what you stand for in terms of fair, ethical and professional conduct and being accountable to that commitment, can and will go a long way to maintaining and building trust.

Along with its External Dispute Resolution (EDR) responsibilities and its role in identifying systemic issues, AFCA plays a very active and important role with Industry Codes of practice.

Industry Codes of practice are critical to our assessment of what is fair and reasonable in the circumstances.

AFCA’s constitution specifies our responsibility to support these codes of practice. We do this through the provision of secretariat support to the independent committees that monitor industry compliance with their relevant Code of practice. This includes supporting the Insurance Brokers Code Compliance Committee.

Both our EDR role and code secretariat support role are focused on improving industry practices and improving customer outcomes.

The AFCA Board takes this role very seriously and is considered in determining to which industry Codes it will provide secretariat services.

There are standards that need to be met and must continue to be met. AFCA’s secretariat support to Code Committees is not a given. The co-regulatory model must be effective. There are two key elements to this – the Quality of the Code itself and then independent monitoring arrangements to test and assure industry is accountable to its commitments.

Some of the key factors the AFCA Board will look for in a strong Code is a Code that draws on a wide range of stakeholders – not just industry, but genuine consultation with consumer groups, regulators, the Code Compliance Committee and other interested stakeholders.

The consultation should allow sufficient time and be as transparent as possible, for example, publishing submissions. Then be clear about how issues have been considered.

Codes should move forward, never backward. They are a progressive conduct model that should seek to go above and beyond the base standards of the law.

Of course, having a good Code is not enough. We carefully consider the independent monitoring arrangements and enforceability of the Code. This speaks to the industry’s commitment to the standards it has set itself. This includes:

• Being sufficiently resourced to undertake meaningful independent assurance activities including being able to proactively investigate new and emerging issues or undertake own motion enquiries. This will deliver the greatest value for you, getting ahead of issues early, reducing risks to clients and avoiding much more costly downstream interventions, regulatory intervention or legislative changes.
• Operating independently of industry – although funded by industry, the Code Compliance Committee must operate independently. This is critical to the effectiveness and credibility of the model. This means there may be times when Code committees and industry have different views on issues. Differing views on issues are a healthy sign of independent thinking, fostering robust discussions and driving continual improvement.
• Transparency – publishing reports and findings including breach data; some of which can make industry uncomfortable. But it is important to call out areas requiring careful review and action.

The value of a strong Code cannot be overestimated. It demonstrates that the sector is customer centric, open to review and strong and confident enough to withstand scrutiny. And when it can be shown by an independent body to be operating in an ethical and accountable manner, it builds trust across the entire spectrum, from customers to Regulators and government.

AFCA is looking forward to contributing to the review of your Code. This is an important piece of work and we encourage NIBA to follow a similar approach to the Insurance Council of Australia when they reviewed their Code. Approaching reviews constructively and with a view to implementing positive change is a benchmark we would like to see in the review of all Codes.

The review of your Code comes at an important time, with so much scrutiny of the insurance sector, and this an opportunity to respond strongly and effectively to this scrutiny.

AFCA would like to see a stronger commitment in your Code to transparency of remuneration and conflicts of interest. As I mentioned earlier, there are many eyes upon you now and the review of your Code is an opportunity to draw a line in the sand on opaque and damaging practices.

Shining a light on the issues you may prefer to keep in shadows is what AFCA expects of itself and its members.

A hard lesson on the value of transparency was learned by the banking industry who are still, to some degree, dealing with the repercussions of the Royal Commission. We would like to see a bigger commitment from all facets of the insurance industry, including brokers to getting ahead of these issues now.

Because ultimately, if you’re not prepared to take on this important role yourselves, the risk is that someone else will come in and do it. Just as they did with banking.

I would now like to turn to an important initiative on AFCA’s radar.

As you may be aware, the Australian Government is currently consulting on draft legislation to implement a Scams Prevention Framework. This is an economy-wide reform to protect the Australian community from scams.

AFCA is watching this with particular interest because, in the last financial year, we dealt with almost 11,000 scam complaints. This is an 81% increase on the previous financial year.

With scams now representing 1 in 10 complaints made to us, we witness first-hand the impact of scams on consumers and small businesses.

The Government is seeking to establish a whole-of-ecosystem response to scams and this includes prescribing AFCA as the single external dispute resolution scheme for banks, telecommunications providers and digital platform services.

We are committed to working with Government, industry participants, regulators and consumer stakeholders to help shift the dial in scam prevention and response in Australia, to help protect consumers from this criminal activity.

Thank you, I am happy to take questions.