The Australian Securities and Investments Commission (ASIC) will be looking closely at how insurance is sold to consumers, and pressing for stronger penalties for breaches, Commissioner Peter Kell told last week’s Insurance Council of Australia (ICA) Regulatory Update conference in Sydney.

He said internet advertising presents a challenge because it is often relatively brief and constrained in the information it includes.

“Promoters should consider the overall impression created by the advertisement when viewed by itself for the first time,” Mr Kell said.

“For example, the stronger a headline claim in an advertisement, the more important it is for any risk information to be included in the advertisement itself and not included in a reference to another page where the consumer can find out information about the risks.”

He said insurers that are changing product disclosure statements because of flood coverage must ensure the documents are “clear, concise and effective”, while appropriately disclosing all relevant aspects of the policy.

This year ASIC will focus on “gate keepers” such as product manufacturers and distributors, and wants to work with the industry on improving financial literacy, reducing underinsurance and increasing consumers’ access to advice.

It will look at consumer information, through advertising and disclosure, and claims-handling and internal dispute resolution.

Consumer advocate Catriona Lowe says insurers have to pay more attention to ensuring their marketing promises match what policies actually deliver when consumers make a claim.

Ms Lowe, co-CEO of the Consumer Action Law Centre, told the conference there is “a bit too much fluffy marketing at the start of the process that ends with black letter at the end of the process”.

“There needs to be consistency across the spectrum of the consumer experience,” she said.

Ms Lowe said insurers should start “at the consumer end and work back” when writing product information and acknowledge at the start that insurance might be complex.

General Insurance Ombudsman John Price says the Financial Ombudsman Service has found consumers who buy insurance over the internet often have a clearer understanding of the product because they have read the information they need online.

But he warned the information is sometimes misleading or not as clear as it should be.

ICA CEO Rob Whelan said there are regulatory issues around informing consumers at the point of sale, with call centre staff often restricted from giving helpful information because it could be regarded as offering advice.

“Some of the restrictions on the industry have inhibited our ability to provide very basic information to people,” he said.

Asked about mobile phone apps, he said the industry must respond to people who want to use newer forms of communication.