A life insurance insurance broker is a specialist in life insurance and the management of financial risks arising from death, illness or injury.
Brokers generally act on behalf of their clients and provide advice in the interests of their clients. They can help save you time in dealing with a life insurer.
A broker can help you identify your individual and/or business risks to help you decide what to insure and how much to insure.
Insurance brokers can give you technical advice that can be very useful if you need to make a claim and help lodge and manage a claim with an insurer.
Brokers are aware of the terms and conditions, benefits and exclusions and costs of a wide range of competing insurance policies, so they can help you find the most appropriate cover for your own circumstances.
Brokers can help arrange and apply for the cover with the chosen insurer and can often provide advice on how to make the most of your insurance budget.
Why use a broker ?
Insurance brokers have access to many different life insurance policies and deal with a range of insurance companies.
Because the life insurance industry in Australia offers so many options, it can be quite difficult to choose the right policy.
Some insurance policies can be complicated, and an insurance broker can help you understand the details of a policy and also work out what level of cover you need, so that you can make sure you are properly protected.
Depending on the type of advice a broker may provide, they may be required to provide that advice, in addition to other information, in a document called a Statement of Advice. This is provided when personal advice is given that takes into account your own needs, obligations and circumstances.
Brokers can often find you a good deal on insurance because they have a thorough understanding of the insurance market and can try negotiate premiums on your behalf.
A broker will explain your policy to you and advise you if there are any special situations you need to know about. Often consumers and businesses will make a decision based purely on the lowest price – and that can backfire in the event of a claim if you find out you’re not adequately covered, or even not covered at all for the loss that occurred.
If you need to make a claim on your policy, your broker will assist you through the process and will liaise with the insurer on your behalf.
Insurance brokers might charge you a fee for their services, or they might receive a commission from the insurance company. They are required to advise you of the fees that they charge or the commission they receive. This may be set out in the Financial Services Guide, Product Disclosure Statement or where a broker has provided you with personal financial advice, the fees and costs associated with their advice will be set out in your Statement of Advice.
Regulations
All insurance brokerages in Australia must have an Australian Financial Services licence, or be appointed as an authorised representative of an AFS licensee.
Brokers must also meet the conduct standards set out in the Corporations Act 2001 (Cth) (Corporations Act). There are general conduct obligations that apply to all financial services licensees and authorised representatives and specific conduct obligations that apply to an adviser who provides personal financial product advice.
Where a broker provides you with personal financial advice then in accordance with the Corporations Act they must:
- Act in your best interests
- Provide you with appropriate advice
- Warn you if their advice is based on incomplete or inaccurate information
- Prioritise your interests where there is a conflict with their own interests (or an interests of a related party)
- Prepare and provide you with a Statement of Advice (SoA) that documents their advice in relation to the insurance policy
The Australian Securities and Investments Commission is the industry regulator that monitors the conduct of those who hold an AFS licence.
Brokers are required to be members of an authorised external dispute resolution scheme as a condition of their AFS licence. Generally, the Australian Financial Complaints Authority is the independent organisation that helps resolve complaints and problems between life insurance brokers and their clients. Brokers are bound by the decisions of AFCA.
What qualifications does a life insurance broker need to have ?
The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 established the Financial Adviser Standards and Ethics Authority (FASEA) in April 2017, to set the education, training and ethical standards of licensed financial advisers in Australia.
The new requirements commenced on 1 January 2019.
New Entrants are required to hold an Approved Degree before they commence their Work and Training (Professional Year) requirement. They must be mid way through their Professional Year before they are eligible to sit the Financial Adviser exam and commence using the term Provisional Financial Adviser or Provisional Financial Planner.
Existing Advisers have until 1 January 2022, to pass the Financial Adviser Exam and until 1 January 2026, to reach an education standard equivalent to an Approved Degree
Are life insurance brokers required to complete Continued Professional Development activity ?
The annual requirement for 40 hours Continuous Professional Development commenced on 1 January 2019. Provisional Financial Advisers will be required to undertake CPD after completion of their Professional Year.
What is the code of Ethics for life insurance brokers ?
The Code of Ethics comenced on 1 January 2020, with all Financial Advisers required to adhere to the Code from that day onwards. This can be found here : https://www.fasea.gov.au/code-of-ethics/
Do you have to pay for the services of a broker?
Many insurance brokers get paid a commission by the insurance companies when the policies are purchased.
Does it cost more to use a broker?
Not necessarily. It can cost less because brokers have knowledge of the insurance market and can negotiate competitive premiums on your behalf. A broker is obliged to advise you of the fees charged for the services provided to you, so there are no hidden costs. Fees should be set out in the Financial Services Guide, Product Disclosure Statement or where a broker has provided you with personal financial advice, the fees and costs associated with their advice will be set out in your Statement of Advice.
Life insurance and Financial Advice services are provided by Experien Insurance Services Pty Ltd (EIS) ABN 99 128 678 937 and Experien Financial Services Pty Ltd (EFS) ABN 32 631 346 757. EIS and EFS are a Corporate Authorised Representative (No. 320626 and No. 1274354) of Affinia Financial Advisers Limited ABN 13 085 335 397 AFSL No. 237857.This is general information and you should not act on it, or rely on it, without obtaining personal advice. Always read the product disclosure statement (PDS) issued by an insurer before considering to take out insurance. See our website for our Financial Services Guide.
