According to the Insurance Brokers Code Compliance Committee (IBCCC), more than half of brokers provide fee information to their clients, and the majority have established “widespread best practices” that foster a culture of compliance and ensure good client outcomes.
About 76% have procedures in place to identify violations or potential issues, 67% use checklists to ensure they are providing customers with the information they need, and 65% have completed an external compliance audit within the past three years to identify gaps or to identify weaknesses in compliance processes.
IBCCC released the findings today as part of its Own Motion Inquiry report, based on responses from 415 subscribers to the Code of Conduct for Insurance Brokers on organizational culture.
“It was gratifying to see that all subscribers reported having at least one of the eight processes or procedures listed in the questionnaire to promote good behavior and improve compliance with the Code,” the IBCCC report says.
“Together with the many examples of best practices, this shows that all subscribers are able to implement processes that improve their compliance.”
According to the report, about 57% of Code subscribers said they provide customers with cancellation and fee information in plain English, with actual disclosures of brokerage fees or commissions.
In the most comprehensive examples, subscribers reported including detailed information on customer bills with a full breakdown of bonuses, fees and commissions.
In contrast, other subscribers reported that they provided customers with information about fees and commissions as an attachment to the invoice, typically as a Statement of Advice (SOA), General Advice Warning, Financial Services Guide (FSG).
“Providing clients with information about fees, commissions and other key policy advice in a single document — especially one that is not the main invoice — is not considered best practice,” the IBCCC report said.
“All subscribers should take a similar approach when sharing information with customers. Subscribers should provide information about fees and commissions and terms and conditions in plain English and through various communication channels, including in conversations and meetings with customers.”
Disclosure of fees and commissions will become a major topic of discussion in the coming months after the Advice Quality Review suggested brokers must obtain written consent from clients to pay commissions.
The review recommended exempting commissions from the ban on conflicting pay and will submit its final report to the federal government by December 16.
Click here for the report.