General insurers will be permitted to provide “simple advice” under a new model announced today by Financial Services Minister Stephen Jones, as the Albanese Government wraps up its response to the Quality of Advice Review (QAR) final report.

The Insurance Council of Australia (ICA) says the move will allow customers to benefit from “clearer conversations” with their insurer, leading to better financial outcomes.

Under the proposed new model, a new category of “qualified” financial advisers – who will be employees of general insurers – will offer consumers guidance on “less complex matters”. The advice model will apply also to life insurers, banks and superannuation funds.

Insurers and other financial institutions will be wholly responsible for the advice provided, and commissions or fees are to be prohibited under the planned model.

Treasury says the new class of financial advisers adopts a QAR recommendation to allow financial institutions to employ and train staff for the purpose of giving customer advice.

However, the Government is proceeding with the reform by introducing additional guardrails that were not in the QAR report: they will be subject to a “modernised” best interests duty rule, meet legislated competency standards and comply with additional obligations.

But two key QAR reforms proposals, expanding the personal advice definition and creating a good advice duty obligation, have been rejected.

Mr Jones says the measures announced today “will expand the supply of advice under a new model that will deliver simple advice at scale that will be high quality, helpful, and safe for consumers”.

“This is a pragmatic step that will expand the provision of personal advice to improve consumer outcomes,” he said.

“On scope, qualified advisers will focus on providing simple financial advice. On fees, qualified advisers will be prohibited from charging a fee and from receiving a commission, which will help to restrict their advice to simple advice.”

QAR Reviewer Michelle Levy says she is pleased that the Government has decided to change the law to help more people get financial advice when they need.

“I am especially pleased that there can be a multiplicity of providers,” she told insuranceNEWS.com.au.

On the Government's decision on personal advice, she says her aim for an expanded definition was two fold: to give providers of advice, mostly institutions, more certainty about when they are providing personal advice and general advice, but more importantly to improve the quality of advice that people are given.

“It was and is my view that personal advice which takes into account the recipient's personal circumstances is usually more helpful than advice which does not do so,” Ms Levy said.

“Having said that, I suspect that as institutions have more and more personal information about their customers and members, it will be more likely that much advice they [have] given them will be personal even without the change of definition I recommended.”

ICA says the proposed revised regulations, introducing the new class of “qualified advisers” and allowing for less-complex financial advice without the need for full professional qualifications, will significantly improve access to advice about simple insurance matters that are currently not allowed.

The flagged changes are particularly important in the context of the growing protection gap, as customers will be better informed to be able to choose insurance that covers them against the risks they face.

“Insurers share their customers’ frustration with the one-size-fits-all approach of the current regime,” ICA CEO Andrew Hall said.

“The regulations put in place following the Hayne royal commission recommendations were well-intentioned, but by seeking to strike out bad financial advice got rid of insurance advice for most ‘mum and dad’ consumers.”

Industry watchers say they will be watching for more details about the planned “modernised best interests duty” regime.

“There are scant details in the attached Treasury document as to what that will involve,” McCabes Principal Mathew Kaley, a specialist in financial services law, said.

“However, it is notable that the Government states that the revised best interests duty will apply to ‘all providers of advice’…this should be monitored closely.”

Click here for the Treasury document.