The Australian Consumers Insurance Lobby (ACIL), the Owners Corporation Network of Australia (OCN), and the Unit Owners Association of Queensland (UOAQ) have warned the National Insurance Brokers Association (NIBA) that unless its revised Code of Practice properly addresses conflicts of interest in the strata insurance sector, the issue will be escalated directly to regulators.
The warning comes as part of the current consultation on the Insurance Brokers Code of Practice, with the groups calling on NIBA to take a clear position on arrangements that involve payments or financial benefits to parties who owe fiduciary duties to clients, such as strata managers.
Tyrone Shandiman, Chairperson of ACIL, said: “This is a simple issue. If it is unlawful for a fiduciary to receive a financial benefit because it conflicts with their duty to the client, then brokers should not be participating in or facilitating that conduct. That is not a grey area — it is an unmanageable conflict of interest.”
Under ASIC Regulatory Guide 181, financial services licensees are required to avoid conflicts of interest that cannot be effectively managed. The groups argue that where broker remuneration structures involve payments to fiduciaries, the conflict is inherently incapable of being managed and must be prohibited.
David Glover, joint managing director of the Owners Corporation Network, said: “You cannot ‘manage’ or ‘disclose’ your way out of a conflict that depends on breaching fiduciary duty. Where these arrangements exist, the only appropriate response is to prohibit them. Consumers should not have to try to work within structures that are fundamentally inconsistent with their interests.”
Despite sustained media attention and industry scrutiny of strata insurance practices, the groups say the current direction of the Code risks simply restating existing legal obligations rather than providing clear professional guidance.
Mike Murray, President of the Unit Owners Association of Queensland, said: “There has been extensive scrutiny of strata insurance practices, and the issues are well understood. For the industry to fail to address them through its own Code would be a significant missed opportunity and would further erode consumer confidence.”
The organisations have made it clear that if the Code does not adequately address these issues, they will seek direct regulatory intervention.
Mr Shandiman said: “If NIBA does not act, we will take this issue to ASIC and seek clarification and amendment to Regulatory Guide 181 to ensure these practices are explicitly addressed. There is sufficient evidence and legal foundation for regulators to intervene if required.”
The groups say the industry now faces a clear choice: set and enforce professional standards through its Code, or have those standards imposed through regulatory action.
Tyrone Shandiman
Australian Consumer Insurance Lobby
E: info@acilobby.org.au
P: 07 3185 5256
David Glover
Owners Corporation Network
E: david.glover@ocn.org.au
Mike Murray
Unit Owners Association of Queensland
This post appears in Strata News #788.
This article has been republished with permission from the author and first appeared on the Australian Consumer Insurance Lobby website.
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