The Australian Securities and Investments Commission (ASIC) has issued 38 interim stop orders on sales of 67 pet insurance products issued by Hollard and its underwriting management agency PetSure.

ASIC says the move marks the first time the regulator has used its design and distribution (DDO) intervention powers in response to “deficiencies” in a target market determination (TMD) for an insurance product.

Under DDO laws that commenced in October 2021, insurers must design financial products that are likely to be consistent with the likely objectives, financial situation, and needs of the consumers for whom they are intended.

“This action follows a risk-based and targeted review of insurance TMDs. ASIC is considering further stop orders for other insurance products,” the regulator said in a statement today.

ASIC says the stop orders relate to pet insurance products issued by the insurers via brands including Woolworths, RSPCA, Petbarn, Guide Dogs, Medibank, Bupa and HCF.

Hollard and PetSure are prohibited from engaging in retail distribution of the affected products for 21 days unless the stop orders are revoked earlier.

“ASIC made the interim orders to protect consumers from acquiring pet insurance products that may not be consistent with their objectives, financial situation or needs,” the regulator said.

The regulator says it “was concerned that the insurers failed to appropriately define the target market for these products using objective and tangible parameters”.

In particular Hollard and PetSure “may not have properly considered the ‘financial situation’ of consumers in the target market, such as their ability to afford premiums and to pay for treatments upfront before being reimbursed by the insurer” after a claim is approved, ASIC said.

The regulator says it was also concerned the insurers “did not properly consider the requirement for consumers to pay for veterinary expenses in full and upfront before receiving a partial reimbursement under a claim”.

“ASIC expects the insurers to consider the concerns raised regarding the TMDs and take immediate steps to ensure compliance,” the regulator said.

“ASIC will consider making a final order if the concerns are not addressed in a timely manner.”

Hollard said that ASIC had today given notice to the insurer regarding TMDs for some of the products it distributes.

"Hollard is working collaboratively with ASIC to update the relevant documentation to include more information regarding a customer’s ability to pay for out-of-pocket costs and premiums that are subject to change over time, to ensure the TMDs are compliant," a spokesperson told insuranceNEWS.com.au.

“Existing customers will not be impacted by the temporary pause to new business.”

PetSure advises on its website that PetSure and Hollard have temporarily paused new policy sales for some insurance products as a result of ASIC concerns regarding TMDs.

"Existing customers can make pet insurance claims as normal," it says. "Thank you for your patience while we work swiftly to resolve this issue."