Assistant Treasurer Stephen Jones has provided more detail on the federal government’s plan for a new simple advice model that will change how general insurers engage with customers.

Under the proposed model, a new class of advisers will provide “safe and simple advice to more Australians, such as [on] choosing an insurance policy”, he said today.

“Millions of Australians are unable to get the financial advice and information they need,” said Mr Jones, who is also Financial Services Minister.

“Without affordable advice, Australians will either get no advice … or seek advice from dodgy sources and scammers. The status quo of the financial advice laws is unacceptable.”

He says there will be new guardrails to protect consumers.

“The new class of adviser will be restricted to providing advice on products issued by prudentially regulated entities. They will be prevented from providing advice on more complex topics … through a blacklist to be prescribed in regulations. This will allow these advisers to focus on simple topics that most Australians would benefit from more information on.”

He says the adviser class will not be allowed to charge ongoing fees or receive commissions. They will be subject to current anti-hawking restrictions and limited to consumer‑initiated engagement with new customers, to ensure they cannot cold call or offer unsolicited advice.

The government has been consulting with stakeholders after flagging the simple advice model at the end of last year as part of its response to the Quality of Advice Review.

It is now developing exposure draft legislation for public consultation. 

The move is part of the second phase of advice reforms under the Delivering Better Financial Outcomes package, which includes modernising financial advice laws.

A Treasury fact sheet says another measure relates to modernising the best-interests duty to make it outcomes-focused and remove process-based safe harbour steps. “This will ensure customers receive more tailored and helpful advice that is in their best interests and meets their needs, including on single-issue or limited-scope issues. The existing concessional treatment for personal advice on basic banking and general insurance products will be maintained.”

insuranceNEWS.com.au has asked the Insurance Council of Australia for a comment on Mr Jones’ update. ICA said last month the current set-up “unnecessarily constrains the ability of insurers to provide product advice tailored to a customer’s specific query or circumstances”.

It backed the simple advice model when Mr Jones first flagged it last year.

Under current laws, insurers can provide general advice only. Consumers seeking insurance that takes into account their personal circumstances usually need to engage a retail broker for advice.

The National Insurance Brokers Association says it wants to review the draft legislation to assess how the reforms will affect its members and the broader general insurance industry. “Understanding the practical implications of these reforms will be essential to ensure they achieve their intended objectives without unintended consequences for consumers or the broking profession,” it said.

NIBA CEO Richard Klipin says the changes must “strike the right balance between robust consumer protection and the delivery of accessible, high-quality advice”.

Click here for the fact sheet.