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Hayne’s no hawking rule threatens insurance ‘turmoil’

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Reforms to prevent hawking following Hayne royal commission revelations could create “turmoil” for the general insurance industry, Finity has warned.

While all unsatisfactory sales conduct highlighted in last year’s hearings was related to life insurance and funeral cover, that might not stop general insurance being caught up in changes to the law.

Commissioner Kenneth Hayne’s final report recommendation 4.1 specifies “hawking of insurance products should be prohibited”, and the government pledged to act.

But Finity warns outlawing “cross-selling” could be a particular problem.

“If you arrange car insurance on the phone, can an insurer ask about your home insurance? Can a travel agent offer you travel insurance?

“This is where we see the anti-hawking changes could create turmoil.

“Taking the anti-hawking definition and the recommendation at face value, many current practices would become illegal.”

At least some of those practices are of no obvious detriment to consumers, Finity says.

“It is necessary to evaluate whether the various cross-selling situations are indeed a detrimental hard-sell of unwanted products or are beneficial to consumers in terms of awareness and convenience.

“To use the travel example, there could be significant benefits for consumers, especially the less financially sophisticated, in reducing the risk of taking an overseas trip without thinking about travel insurance.”

Finity believes insurance brokers are unlikely to be significantly affected by changes to anti-hawking laws. “Most offers of insurance that they make are solicited or would be regarded as solicited.”

It says some add-on insurance products have flagged genuine concerns, but there are other measures being brought in to deal with that issue.

“The royal commission has made a number of recommendations to deal with this situation – including deferred sales, commission limits and product design and distribution obligations.

“Is the extension of anti-hawking needed to deal with these circumstances as well as all the other provisions?”

Finity says “careful consideration” will be required to prevent any changes to anti-hawking laws having a detrimental impact.

“One could argue that the current law is adequate and should have been enforced, rather than needing new laws.

“Most general insurance products are not prone to mis-selling or overselling.

“The vast majority protect a physical asset or legal liability and only one insurance policy is needed for each asset or legal exposure.

“Careful consultation will be necessary to strike the right balance between protecting consumers and allowing the convenient and helpful offer of insurance products to consumers.”