General insurers should brace for a wave of regulatory repercussions stemming from the Hayne royal commission outcomes, even though the new rules will have been triggered by misconduct elsewhere in financial services, Finity Consulting warns.

“From a regulatory and legislative point of view, I think we are going to see some changes next year,” Finity Principal Andy Cohen told insuranceNEWS.com.au.

“I think the general insurance industry will get caught up in some of that, and it may well be wrapped up in the reactions to what has happened in the life industry.”

The four general insurance case studies examined by the royal commission trod a “well-worn path” through add-on insurance, claims handling after disasters and weak risk and compliance cultures, Finity’s new Optima report says.

Mr Cohen says the hearings highlighted poor situations and “room for improvement” rather than systemic general insurance industry failings.

In the life sector, high-pressure sales tactics and the treatment of policyholders generated royal commission headlines, while an interim report, which excluded general insurance, highlighted culture issues and the need for better enforcement.

“The risk for [general] insurers remains becoming caught in the regulatory pull as other parts of the financial system come to terms with the impacts of the royal commission,” Finity says.

The royal commission is the latest and most high profile of a raft of reviews since the Financial System Inquiry in 2014, with a number of changes flagged or set to take effect.

Regulatory responses to the failure of one part of the system are increasingly borne by institutions in another part, Finity notes.

“Harmonisation may simplify regulatory responsibility but carries with it the risk of unnecessary interference in the operations of insurers and the creation of a culture of grudging compliance.”

An extension of unfair contract terms legislation is expected for retail and small business policyholders, Finity says. Insurers will also be subject to new design and distribution obligations and product intervention powers that could significantly increase costs in some situations.

Financial services companies are also still grappling with transparency and disclosure issues and proposals, with reviews highlighting consumer financial literacy limitations, disengagement and that more disclosure is not necessarily more effective.