The Insurance Council of Australia (ICA) has called for the regulator to carry out confidential checks with firms before it publicly announces planned interventions over any products it believes will cause consumer harm.

ICA says the Australian Securities and Investments Commission (ASIC) should privately contact companies to clarify possible misunderstandings and ensure there are no factual errors, given the potential of the new product intervention powers to cause reputational damage.

An ASIC consultation paper suggests that simply publishing a proposed order on its website and inviting comment would meet its consultation obligations. It would also consult the Australian Prudential Regulation Authority (APRA).

“Notwithstanding, there should also be meaningful confidential engagement with affected firms ahead of any public release of the proposed product intervention order or its contents,” ICA says in a submission ahead of ASIC’s September release of a regulatory guide.

Federal Parliament passed the intervention powers earlier this year, along with new product design and distribution obligations. But details of how they will operate are still being finalised.

The new powers were proposed by the Murray Financial System Inquiry, which released its final report in 2014. Last year’s Hayne royal commission also supported the introduction of the measures.

ICA says the Murray inquiry highlighted the significant commercial impact of interventions and proposed the regulator should be held to a high level of accountability.

“It recommended that ASIC should engage with potentially affected firms as well as consulting with other regulators including APRA before any use of the power,” ICA says.

The insurers’ peak body has also called for flexibility on when orders take effect so that firms have time to respond.

“Complying with a product intervention order may require affected parties to extract such offerings from the digital channel, which could take time and may not be achieved immediately,” it says.

The intervention powers range from ordering changes to the way a product is sold to an outright ban. Rulings can remain in force for up to 18 months, with any extension or permanent change requiring Ministerial approval.

ASIC is set to also release a separate consultation paper toward the end of the year on its approach to the new design and distribution obligations, as insurers and brokers remain unclear about how the laws will apply for mass marketed retail products.

National Insurance Brokers Association (NIBA) CEO Dallas Booth said today that he and legal adviser Mark Radford had met with Treasury officials yesterday to discuss the issue and they had presented a possible approach.

“We are continuing to develop the concept and will provide further details in due course,” he said. “Our next step will be to discuss the matter with the Insurance Council to see if we can develop a jointly agreed approach.”