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29 October 2020
Australian Securities and Investments Commission (ASIC) Senior Executive Leader – Insurers Emma Curtis says the recent Insurance Brokers Code Compliance Committee report has raised “some serious concerns”.
Ms Curtis told the National Insurance Brokers Association (NIBA) virtual convention that issues include concerns about a lack of transparency and the long delay in the review of the code.
“A significant concern for ASIC is that almost half of subscribers continue to report no breaches of the code,” she said. “This really raises questions about the adequacy of breach detection and reporting mechanisms and the robustness of compliance frameworks and most importantly, perhaps culture.”
The report has also highlighted that complaints handling timeframes have continued to increase, she said.
“While we recognise the operating environment has been challenging this year, it is really important that complaints are handled quickly,” she said.
Ms Curtis also told the convention that final regulatory guidance on the design and distribution obligations would be released in coming weeks and that ASIC would expect compliance from “day one” of the new rules, which take effect next October.
“It is important that insurers and industry experts, like brokers get involved early to make it work,” she said.
Earlier NIBA CEO Dallas Booth told the convention that the DDO legislation was a “big ticket” item that was complex and it would be important for brokers to understand requirements in the first half of next year.
Mr Booth was a critical of new proposed add-on insurance reforms, saying they are too broad and risk causing insurance not to be taken out at crucial times such as when cars are being rented
The final legislation is yet to be released or introduced into Parliament but the approach indicated in consultations and proposals to date is “very worrying” and suggests the laws will capture circumstances where there are not problems, NIBA says.
“There are so many areas where there is a product or service of some nature and some insurance goes along with it for very valid reasons,” Mr Booth said.
The planned deferred sales model was sparked by the sale of poor value products through motor dealerships, but as proposed could also capture a range of other circumstances, a regulatory update session at the NIBA convention was told today.
The model introduces a waiting period between when the main product or service is purchased and when associated insurance is bought, with the Government aiming to eliminate high-pressure selling tactics.
Mr Booth says problem examples could include insurance sold with rental cars, travel insurance required for last-minute flights, and insurance sold in conjunction with bicycle club memberships.
“It is going to force that to split into two separate transactions and I can’t see any benefit coming out of most of that at all,” he said. “The legal concepts are massively difficult.”
Legal adviser Mark Radford says the legislation will come under the Australian Securities and Investments Commission Act, and seeks to channel sales directly with insurers.
But the Government’s “one-size, big broadbrush” approach on the issue could have adverse consequences, he says.
“The real risk is that by doing this, insurance is not available at the point of sale when it should be, people don’t go direct to the insurer, and in the deferral period they suffer a loss and they are exposed,” he said.