Insurers say the proposed regulation of product responsibility is based on a definition that doesn’t reflect the way they operate.

Under new enforcement measures, a civil penalty for a breach of accountability obligations by an accountable person will be possible as the Australian Prudential Regulation Authority (APRA) extends the Banking Executive Accountability Regime (BEAR) across all its regulated industries.

The proposals related to responsibility are currently aimed at authorised deposit-taking institutions (ADIs) but the Insurance Council of Australia (ICA) has made a submission identifying issues when BEAR is extended to general insurers.

“The…council and its members do not support APRA’s proposed broad interpretation of what is in scope of end-to-end accountability,” the ICA submission says. “Instead, we submit that a narrow definition that more closely aligns with product development and advice and sales would better reflect the operational structure of insurers.”

CEO Rob Whelan says ICA is concerned the broad scope and “joint nature” of proposed product responsibility could create duplication for insurers.

“We suggest that the requirement to have an accountable person with end-to-end responsibility for each product that an entity offers to its customers may be superfluous,” Mr Whelan said.

“To minimise duplication (of accountability), we submit that a narrower interpretation of end-to-end product responsibility is more appropriate.”

Mr Whelan says the proposals have the potential to conflict with existing dispute resolution principles and “leave open the question of whether an accountable person in one entity should be accountable for the actions of third parties”.

Noting that insurers regularly participate in syndicates to offer insurance to customers, he questioned whether an accountable person in one entity could be held accountable for the actions of other members of the syndicate.

“Similarly, in a claims handling context, insurers often engage external suppliers (builders, restorers, smash repairers),” the submission says.