Insurance Brokers Code of Practice 2014 (The Code) An Overview for Staff Prepared by MSM Compliance Services Pty Ltd

Who Are MSM Compliance? MSM is a national professional services business focused on the general insurance industry. Your company has engaged MSM to assist in the management of its obligations as a holder of an Australian Financial Services Licence. MSM helps to ensure that you and your company comply with your AFS Licence obligations with the least disruption to your core business.

Why are you reading this? The Code has been updated with effect from 1st Jan 2014. To provide you with an overview of the key changes and obligations of The Code. It will present you with a synopsis, but not the detail. You should still take the time to read the full Insurance Brokers Code of Practice.

Why is there a Code? Designed to go beyond the requirements of the law. Developed by the industry in lieu of more Government legislation. Puts concepts in plain English – much more user friendly than legislation.

Code Background Developed by the National Insurance Brokers Association (NIBA). Input from industry bodies, ASIC and consumer groups. Replaces the Insurance Brokers Code of Practice (2006) effective 1/1/2014. Managed by the Australian Financial Complaints Authority (AFCA).

Objectives of Code Describe standards of good practice and service. Clarify members legal obligations. Promote better relationships between client/intermediary/insurer. Promote effective dispute resolution with client involvement.

Does The Code apply to our business? NIBA members are required to adopt the code as a membership obligations. Other Licensees can subscribe to the code voluntarily by applying to AFCA. ASIC expect that AFS Licensees will follow relevant industry Codes.

What Has Changed in Code? The layout of the Code has been updated. Clarifies that Brokers/Insurers etc. are covered by the Code when buying insurance. Reinsurance is specifically excluded from Code coverage. Expanded Conflict of Interest commentary – same obligations as already exist under ASIC Regulatory Guide RG181.

What Has Changed in Code? New obligation to advise clients when using another broker to assist in arranging insurance and explain their role. New obligations when providing “Personal Advisory Services”. Consistent with the obligations created by the Future of Financial Advice (FOFA) legislative changes. No impact for brokers using a “General Advice” model.

What Has Changed in Code? Requirement to have clients sign off in writing Foreign Unauthorised Insurer (FUI) placements has been removed. Brokers are still required to advise clients of FUI usage. We recommend that brokers continue to get client sign off. Only request information from insurers for policies that you administer on behalf of client.

What Has Changed in Code? Only provide terms/quotes to clients where insurer has provided. – No “Desk Quoting”. Guidance provided for Group Purchasing Arrangements, consistent with current legislation. Additional guidance when acting on behalf of Insurer – common sense and practical obligations already required by the General Insurance Code of Practice.

What Has Changed in Code? Removal of requirement to specifically advise clients of state taxes and charges. Removal of requirement to explain to clients our remuneration on request. We recommend that this disclosure still be made on request. Expanded obligations for staff / representative training, consistent with existing obligations under ASIC RG146.

What Has Changed in Code? Retain Training Records for 5 years* New obligation to not engage in activity that brings profession into disrepute. Inclusion of definition of a complaint – no practical change to existing processes. Change in days allowed to respond to complaint/dispute from 20 to 21 days – now consistent with AFCA.

What Actions / Changes are required by a Broker? Ensure all staff receive training on new Code and include in their Training Registers. Implement disclosure wording on invoices / standard letters where a “Wholesale Broker” is involved in placement. Update complaint letters documentation to reflect the 21 day response timeframes. Following slides provide Code overview with changes marked with an Asterisk - *

What Activities and Who Does Code Apply To ? General and Life Insurance Risk Management, including inspection and valuation, Mutual Funds and Captives. Claims Management and Premium Funding Excludes reinsurance* Activity coverage is wider than The Corporations Act and your AFS Licence. Applies to all of our clients*

What Requirements (over and above the law) Are In The Code? Must disclose our fees and charges payable prior to performing an insurance service. Prior to policy issue, disclose any commission or fees not pro-rata refunded when policy cancelled. Requires client to be informed when using a foreign unauthorised insurer.* Must disclose Trust Account operations when requested by client.* Must advise and explain if using a Wholesale Broker*

Broking Activity Requirements Act in clients best interests. Provide appropriate advice. Assist with policy requirements and arrangements. Promptly provide proposals to insurers. Promptly advice of coverage / cancellation / expiry etc. Promptly provide policies, certificates etc.

Broking Activity Requirements Only request information from insurers for covers that we manage*. Only provide quotes/terms when supplied by insurer. – no “Desk Quoting”*. Comply with legislative obligations for Group Purchasing Arrangements* Provide clients with up to date information. Provide information to help client determine level of cover required.

Claims Requirements Assist clients in making claims. Promptly pass on to client the insurers response to any claim lodged. Assist the client in the event of a claims dispute.

Binder Requirements Requirement to advise client. Explain in whose interests we are acting for. Comply with the General Insurance Code of Practice where relevant.

Training and Education Requirements Ensure staff have training and skills for tasks given to them. Ensure staff have training on the Code. Retain Training Records for 5 years* Support industry training and education and the promotion of the Code.

Other Items In The Code Discharge duties diligently, competently and fairly and with honesty & integrity. New obligation to not engage in activity that brings profession into disrepute*. Co-operate with the Insurance Disaster Response Organisation in the event of a catastrophe or disaster.

The Code and Complaints Handling Only ask for relevant information. Immediately initiate corrective action. Provide complainant with information we have relied upon. (except where Privacy or other laws intervene). Provide a complaint resolution plan within 21 days of receipt of complaint.* Complaints not resolved become disputes. Disputes are referred to our “Dispute Manager”, who has 21 days to resolve.* If no resolution achieved refer complainant to AFCA.

Practical Implications for Business Ensure Code is referred to in Financial Services Guide / Invoices. Include commission/fee retention in Financial Services Guide / Invoices. Ensure clear Fee disclosure in oral/fax/email quotes. Use Foreign Unauthorised Insurer notice.

Where To From Here? Please take the time to read The Code and if you require further clarification discuss with your Supervisor/Manager