Failure to contact clients at least 14 days before policy renewal accounted for 38% of broker code of practice breaches in the past year, according to an annual compliance report.

The Insurance Brokers Code Compliance Committee says late engagement reduces a client’s ability to properly consider terms and pricing and explore alternatives.

“Clients need enough time before renewal to consider their options, understand any changes to their cover and make informed decisions about the protection they need,” committee chair Oscar Shub said. “When renewal processes are not working properly, clients can be left with uncertainty, reduced choice and, in some cases, real exposure to risk.”

Another renewals clause – requiring brokers to take appropriate, professional and timely steps to seek cover – accounted for 11% of breaches but had the biggest financial impact.

The renewals time frame obligation is described as a core client protection.

“While most reported breaches did not result in uncovered periods, the data confirms that some clients experienced gaps in cover or significant risk exposure, including several instances with a substantial financial impact,” the compliance report says. 

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The overall number of breaches fell 2% to 5417. They affected 14,842 clients, down 52% on the previous year. Complaints were up 8% to 3133.

The financial impact fell to $5.85 million from $7.12 million.

The committee continues to focus on breach reporting levels, after 62% of brokers declared breaches, up from 58%; 140 brokers had no breaches.

“Good compliance is not shown by simply reporting nothing,” Mr Shub said. “Brokers should have systems that actively identify issues, including minor process failures, delayed communications and incomplete documentation.

“Self-identifying and addressing problems is a sign of a more mature compliance framework.”

The most common root causes of breaches included failing to follow process and procedure, manual error, system error or failure, and staff resourcing.

The National Insurance Brokers Association says it will continue to work with members to strengthen renewal processes, including through a code committee best practice guide.

CEO Richard Klipin says the report underscores the profession’s commitment to transparency and continuous improvement under the code and gives brokers a clear picture of where the profession is performing well, and where there is more work to do.

“The increase in breach reporting reflects firms taking their compliance obligations seriously, identifying issues and acting on them,” he said.

“That is exactly the behaviour the self-regulatory model is designed to encourage.”

See the report here.

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