How the Insurance Brokers’ Good Practice Guide is increasing standards for brokers
A valuable reference tool for brokers, the Insurance Brokers’ Good Practice Guide has a number of benefits
Whether you deal with a doctor, a solicitor or an accountant, knowing they adhere to a set of professional standards can provide considerable reassurance. To enable their customers to have the same confidence in the service they receive, insurance brokers are the latest profession to introduce professional standards.
But establishing professional standards isn’t a simple task. The first formal work on broker standards started back in 2014 with the creation of the Insurance Brokers’ Standards Council.
Two years later, following discussions with the British Insurance Brokers’ Association (BIBA), it was agreed that, as both were seeking to create a single voluntary code of conduct and guidance, the IBSC should continue as a BIBA committee.
As well as a range of broker members from large global firms through to smaller regional ones, the committee includes representation from the Chartered Insurance Institute (CII) and, to provide legal support and guidance, Weightmans solicitors. It also engages with the Financial Conduct Authority and the Association of British Insurers to ensure they are informed about the standards.
Paul Anscombe, chair of the Insurance Brokers’ Standards Committee (IBSC), says: “The committee brings together external sources of guidance and legislation together with broker input to create good practice standards. Our aim is to produce guidance that will support a broker: rather than have to go off and find all the reference guides themselves, it’s all contained within the standards.”
Good practice guide
Working together in this way enabled BIBA to launch a Good Practice Guide for brokers at its annual conference in May 2017. This contains nine chapters covering areas such as role and responsibilities, corporate governance, clients and employees (see box below).
Each of these chapters explores different aspects of that particular area in greater detail to act as a valuable reference tool. As an example, included in the chapter on role and responsibilities are the BIBA Code of Conduct, the Insurance Act, data protection and guidance in respect of conflicts of interest, transparency and disclosure in the commercial insurance market.
Although comprehensive, Mr Anscombe is keen to stress the standards are designed to provide a benchmark rather than tell brokers how to run their business. “We want brokers to have a guide that shows them what the acceptable standard is,” he says. “There’s nothing stopping them doing better if they want.”
The guide is also designed to evolve over time. “It’s a living, breathing document,” explains Pam Quinn, head of communications at BIBA. “As new regulations come into force and market practices change, the guide will be updated to ensure it stays current.”
Sarah Mallaby, director of broker markets at Allianz UK, comments: “Being a broker is a challenging profession. You have to juggle the demands of running a business with meeting the rightly high expectations of customers, employees and insurer partners, as well as understanding and implementing significant amounts of regulation. Minimum standards that help lay out what is required are welcomed, as professional, well-run, advice-led brokers not only provide a valuable service to their clients, they enhance the reputation of the whole insurance industry.”
As well as providing a valuable reference tool for brokers and helping to build public trust, the standards have a number of other benefits. Bavita Rai, partner at Weightmans, says they will help to create a level playing field. “There is such diversity in the broking market, with sole practitioners working alongside large global brokerages. This can create inconsistency in service,” she explains. “With everyone operating with the same reference point, the standards will help to ensure consistency. It’s good for the industry and it’s good for consumers.”
Setting standards, especially when the profession rather than the regulator is the driving force behind them, can also improve working practices. “When you set standards you always see people wanting to learn more and differentiate themselves,” says Steve Jenkins, development director at the CII. “As momentum grows, this will make an insurance brokerage an increasingly attractive place to work, helping brokers attract and retain talent. It’s a virtuous circle.”
To support this, he points to the growth in the number of insurance broker firms that have gained corporate chartered status. “Around 200 firms have now gained chartered status,” he adds. “Typically, these are medium-sized firms but we’re starting to see much more interest from smaller firms too.”
The standards will also make it easier for brokers to keep abreast of any legislative and regulatory changes. Mr Anscombe explains: “When a new piece of regulation is introduced there can be overload with training courses, seminars and information from all sorts of interested parties. As this can be overwhelming, especially for a smaller broker, they will be able to use the standards as a reference point.”
The amount of new regulation set to hit insurance brokers’ corporate governance agendas in 2018 is a perfect example of the scenario Mr Anscombe describes.
As well as the extension of the FCA’s Senior Managers and Certification Regime, which is still under consultation, the Insurance Distribution Directive will be introduced in October. This regulates the way insurance products are sold. Brokers will need to ensure they have appropriate procedures in place around areas such as consumer information, remuneration disclosure, and training and competence.
Broader regulatory changes are also scheduled, with the General Data Protection Regulation (GDPR) coming into effect in May. Ms Rai explains: “Brokers, and their customers, will need to review their data protection processes to ensure compliance. If they’re not compliant, they risk a fine that could be up to €20m or 4pc of annual global turnover.”
The implications of Brexit is also on many brokers’ agenda this year. As well as potentially affecting their ability to carry out business across the EU, it could also affect their clients’ insurance requirements.
But, whatever’s thrown at the insurance broker market, having standards that can evolve and adapt to changes in regulation and sentiment will provide considerable confidence to brokers and their customers.
To read the story on The Telegraphs website, please follow the link: https://www.telegraph.co.uk/business/risk-insights/insurance-brokers-professional-standards/