The National Insurance Brokers Association has released a detailed statement explaining the thinking behind its recently released draft code.

In a column provided to insuranceNEWS.com.au, CEO Richard Klipin goes through the review process and why the NIBA board “landed where it did”.

As previously reported, the proposed new code introduces a range of enhancements, including around remuneration disclosure for strata clients, management of conflicts of interest and treatment of vulnerable clients.

However, some industry commentators – including independent code reviewer Phil Khoury, code compliance committee chair Oscar Shub and expert consultant John Trowbridge – have expressed disappointment that remuneration disclosure requirements have not been broadened to include all small businesses, regardless of product.

This particular recommendation was supported by NIBA in January but did not make it into the code, following further consultation.

In his piece, Mr Klipin flags research that shows the high levels of trust clients have in brokers, and the low level of complaints. Less than 1% of Australian Financial Complaints Authority complaints relate to brokers.

“We read those numbers as an obligation,” he writes. “But they also tell you something about where the problem is and is not.

“Through two rounds of consultation, across every channel, the argument for expansion was made in principle rather than from demonstrated client harm.”

Mr Klipin also warns against a code that goes beyond its remit.

“The law sets what is mandatory. The code sets what is professional. The firm decides how it competes. A code that reaches down into the third layer and prescribes a single way of doing business does not lift the profession – it flattens it.”

He also discusses the dangers of over-regulation, arguing too many obligations can compound problems.

“Every obligation a code adds is an obligation someone administers, documents, trains for and pays for,” he writes.

“Where that cost buys a better outcome for clients, it is worth paying, and this draft asks the profession to pay it in several places. Where it does not, the client ends up funding a process that protects nobody.”

Finally, Mr Klipin acknowledges that some stakeholders won’t be satisfied with every part of the draft code.

“On the hardest questions, there was no answer available that would satisfy everyone, and a code drafted to satisfy everyone would have satisfied no one.”

Read the full column here.