Insurance brokers must act now to implement a compliance infrastructure to meet the demands of the ASIC policy statement 161 according to Paul Harding-Davis head of the Financial Services Reform project team at Zurich Financial Services.
Harding-Davis says most brokers are under the false impression that they have until two years from the enactment of the Financial Services Reform Bill (FSRB) before having to comply with new regulations.
“There is a general perception amongst brokers that there is no rush,” Harding-Davis says.
“However, PS161 has been in force since July this year and ASIC has already stated it will monitor the industry closely to make sure it complies.”
He says the policy dictates that the relationship between the broker and their sub-agent must be completely transparent.
“Under the new licensing regime, the broker must be able to demonstrate that he or she ‘owns’ the client information. Historically, this hasn’t always been the case, and creates some real challenges for managing relationships in the marketplace,” Harding-Davis says.
“Brokers also need to be reminded that undisclosed payments for referred leads from other professional firms amount to secret commissions, which are illegal.”
Harding-Davis says there is a need for a rapid “cultural change” in the industry to catch up with regulatory requirements.
Head of distribution Steve Newnham warns that brokers who fail to instigate a satisfactory compliance process for their authorised representatives may suffer serious consequences.
“The bottom line is that if your subagent is seen to be behaving like a broker, your registration may be revoked or simply not renewed again,” Newham says.
“Likewise, the subagent will be in breach of the Insurance (Agents and Brokers) Act for operating as an unregistered broker.”
