Theatre folk are sometimes prone to going ‘off script’, ad-libbing or doing a spot of improv.
While it is fine and often entertaining when an actor does it, it can be fraught if an agent gets a bit carried away when talking about insurance with their landlord clients.
Having a chat is often part and parcel in building rapport with clients, and agents are free to offer up opinions on all manner of subjects from footy to fashion, politics to the price of a cup of coffee.
But when it comes to discussions about financial services products, like landlord insurance, it is imperative that agents stay ‘on script’.
As an agent, you already work within a heavily regulated industry, and it is no different when you are delving into the realm of insurance – it too is underpinned by strict rules.
In fact, all companies or individuals providing financial product advice or delivering a financial service (like insurance) to consumers must be licensed under the Corporations Act 2001 (the Act).
The Act, which is regulated by ASIC, states that anyone who deals in a wide range of activities must only do so under an Australian Financial Services Licence (AFSL).
We know this is not an easy topic to get your head around. So, to help ensure you are doing the right thing, we look at what financial product advice is and the difference between factual information, how you can legally offer insurance to landlords, and why it is important to partner with an insurer like EBM RentCover…
Let’s start at the beginning… what is financial product advice?
Financial product advice generally involves a judgement, evaluation, assessment or comparison of some or all of the features of a financial product.
If you offer a recommendation or opinion that intends to influence a client in making a decision about a financial product, this is known as financial product advice.
If you give financial product advice, you need to hold an AFSL (unless an exemption applies).
What is the difference between giving factual information and giving advice?
ASIC defines ‘factual information’ as ‘objectively ascertainable information, the truth or accuracy of which cannot reasonably be questioned’.
This means, as soon as a recommendation or statement of opinion is made, what is being discussed is no longer factual information and it enters the realm of advice.
In addition to this, if factual information is presented in a way that is intended to, or can reasonably suggest or imply an intention to, make a recommendation about what a client should do, it would also likely be considered advice.
With these definitions in mind, as an agent, how can you offer landlord insurance to clients?
If you arrange an insurance policy for a client (such as landlord insurance), you need to either hold an AFSL or be appointed in writing as a representative of an AFS licensee.
Most agents do not hold their own license, so they need to have an agreement with a business that holds one, such as EBM RentCover.
NOTE: If you simply provide insurance brochures on request from a client, you do not have to be licensed so long as you are not giving advice about the insurance policy and what it covers, and you refer all questions or queries regarding a policy back to a licence holder.
How do I know which provider to partner with?
To avoid the risk of running into legal trouble for acting outside the requirements of the Act, you need to correctly partner with the right insurance provider.
When you work with a good landlord insurance specialist, they should educate, support and train you to make sure you are working within the rules of the Act.
By partnering with the right landlord insurance provider, you can also be afforded a level of protection if you ‘slip up’.
While I cannot speak for other landlord insurance providers, agents who partner with us as Distributors or Corporate Authorised Representatives are protected under our Professional indemnity (PI) insurance cover.
This means, if you make a mistake when you were dealing with our products and services, resulting in injury or financial loss, our PI insurance covers the cost of a legal defence and any damages you may have to pay.
How can an agent partner with EBM RentCover?
At EBM RentCover, there are three levels of partnership – Distributors, Corporate Authorised Representatives (CARs) and Referrers:
Distributors – A Distributor does not need to be registered with ASIC but is authorised to provide a financial service under EBM RentCover’s AFSL.
A Distributor is authorised to supply brochures, flyers and other marketing material from EBM RentCover to clients, arrange insurance for a landlord, and pay the premiums.
A Distributor can provide factual information in both written and verbal form but cannot provide general or personal advice of any kind in relation to EBM RentCover or associated products. We provide relevant training (and on-going monitoring and supervision) to our Distributors on the services that they are authorised to provide to their clients.
We also extend cover under our PI insurance policy for financial services related to EBM RentCover and associated products.
Corporate Authorised Representative (CAR) – A CAR must be registered with ASIC, as they are typically able to provide general advice to a client.
However, EBM RentCover’s distribution model works on a strictly ‘no advice’ basis and therefore CARs are not permitted to provide general advice about our products.
This means Distributors and CARs cannot provide a recommendation or opinion about EBM RentCover or our products, or even present factual information about us or our products in a way that is intended to recommend the client to purchase the insurance. We provide training, monitoring and supervision, and extend our PI cover, to our CARs.
Referrers – Referrers are not authorised by EBM RentCover to provide a financial service or arrange insurance cover, and do not work within our AFSL.
However, a Referrer can still supply our brochures, flyers and other marketing material to clients.
Referrers can also provide factual information but cannot provide general or personal advice of any kind in relation to EBM RentCover or associated products.
We do not provide training to Referrers and they are not covered by our PI insurance.
How can agents offer insurance based on their relationship with EBM RentCover?
What you can do in respect to offering our landlord insurance products to your clients depends on your relationship with us – whether you are a Referrer, Distributor or CAR.
As a Referrer, Distributor or CAR you can:
- Make your client aware that there are insurance products available.
- Advise your client that there are alternative products.
- Provide brochures that include information about what the insurance covers.
- Provide factual information about the products, such as the standard contents cover limit or legal liability cover limit.
- Refer the client to EBM RentCover for any additional product information.
- Assist your client with claims submission (including providing insurer with relevant supporting documentation to help settle a claim).
This is where your authority as a Referrer stops. However, if you are a Distributor or CAR you can also:
- Advise your client that you work with EBM RentCover.
- Provide a quoted premium for your client.
- Arrange the insurance policy for your client.
Irrespective of your alignment with EBM RentCover, you cannot:
- Answer any hypothetical questions regarding the coverage of the product.
- Provide a recommendation to purchase a product from EBM RentCover.
- Provide a recommendation to purchase any associated products.
- Provide an opinion about EBM RentCover.
- Provide an opinion of any associated products.
- Compare one product with another.
- Compare one financial services provider with another.
- Present factual information in a way that is intended to recommend a client to purchase the insurance.
The importance of staying ‘on script’
While there may not be a legal requirement to advise landlords of the availability of insurance to protect against the risks of owning an investment property, many agents consider it a part of providing great service for clients.
No-one wants to find themselves on the wrong side of the law, so agents should be sure to stay ‘on script’ when it comes to talking about landlord insurance.
As tempting as it may be to offer up some personal insight or opinion, it is important that you do not – the authorities do not look kindly on people providing financial advice when they are not licensed to do so.
Check with your landlord insurance provider about your level of authority and understand what you can and cannot say or do within that authority.
If your clients have questions about an insurance product, always refer them to the insurance provider.
For more information, please reach out to your EBM Relationship Manager. Or, not already partnered with EBM RentCover? We would love to chat. Get in touch here.
