Insurers are set up for a raft of new regulations that will start tomorrow, having made “sweeping” changes to their systems and processes in readiness for the Hayne-backed reforms, the Insurance Council of Australia (ICA) says.

New breach reporting obligations kick in tomorrow, requiring insurers to report to the Australian Securities and Investments Commission (ASIC) any significant breaches of their obligations as Australian Financial Services licensees.

Next up on Tuesday are design and distribution obligations (DDO) laws, a deferred sales model for add-on products, anti-hawking rules and introduction of a new duty of disclosure regime that places the burden on insurers to obtain all necessary information to assess insurability and the premium calculation.

“The Insurance Council supports the intention of these once-in-a-generation regulatory reforms to improve consumer outcomes,” CEO Andrew Hall said today.

“Insurers have worked hard to ensure the necessary changes to processes have been made and staff are appropriately trained.

“Pleasingly, the Government and its agencies have taken on board much of our feedback and have been open to changes that avoid unintended consequences from aspects of the new regulatory regime.

“We look forward to continuing that dialogue as the new arrangements are bedded down and better understood in practice.”

ICA says the industry has been working closely with the Federal Government and stakeholders since the Hayne royal commission report and its recommendations were released.

The aim is to ensure the intentions of the reforms are realised, ICA says.

“In facilitating collaboration between industry, consumer groups and regulators, the ICA has advocated for a regulatory regime that allows insurers to deliver services that meet customers’ expectations with no unintended consequences,” the statement said.

ICA says it will be working closely with its members to monitor the implementation of the regulations as they are rolled out.

It stands ready to engage with ASIC, the Australian Prudential Regulation Authority and Treasury should any implementation issues arise.

ICA says the General Insurance Code of Practice will be updated from Tuesday to align with ASIC’s updated Regulatory Guide RG 271 on internal dispute resolution.

Updates include a reduction from 45 to 30 days to resolve a complaint, as well as a revised definition of a complaint. Changes also include a new commitment to improved customer awareness through information on Code subscriber websites about the availability of financial hardship support.

ICA says the code changes have been developed following consultation with key stakeholders, including representatives of the ICA’s Consumer Advisory Committee, ASIC and the Australian Financial Complaints Authority.

Here is the ICA summary of the regulatory changes:

October 1

Breach Reporting Obligations - Financial services firms including insurers are required to report to ASIC any significant breaches of their obligations as Australian Financial Services licensees.

The new regime aims to address concerns of uncertainty about when breaches are significant enough to report, and to improve the consistency of information provided by licensees in their breach reports.

Insurers support the Government’s breach reporting reforms. However they consider there is a further opportunity to reduce uncertainty for the industry and will be working through these issues with regulators and Treasury.

October 5

Deferred sales model - The deferred sales model for add-on insurance introduces a four-day pause between the sale of a primary product and the sale of an add-on insurance product, to help individual customers make informed decisions when purchasing insurance.

Anti-hawking - Working in conjunction with the deferred sales model, the anti-hawking restrictions put certain prohibitions on insurers offering products to consumers while selling other products.

Product Design and Distribution Obligations - Under these obligations 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.

Duty not to make a misrepresentation - A duty to take reasonable care not to make a misrepresentation to an insurer places the burden on an insurer to elicit the information that it needs in order to assess whether it will insure a risk and at what price.