Insurers that mis-sell products to vulnerable customers will face court after the Australian Securities and Investments Commission (ASIC) warned it will use litigation to crack down on concerning industry practices.

Chairman James Shipton flagged the move at a Committee for Economic Development of Australia meeting in Melbourne last week.

The tightening of the screws comes as ASIC invites consultation on the use of new product intervention powers, which give it broad discretion to ban products or features or impose sale restrictions.

ASIC will also start collecting data to establish a baseline against which to measure future regulatory work, Mr Shipton says.

“ASIC’s enforcement work has a core focus on deterrence, public denunciation and punishment of wrongdoing by way of litigation. I want to be clear – the “why not litigate?” discipline we have adopted does not mean ‘litigate first’ or ‘litigate everything’.”

He says the aim is to ensure ASIC is deterring misconduct and fulfilling community expectations that wrongdoing is punished and publicly denounced through the courts. The product intervention power will allow the regulator to improve standards and achieve fairer outcomes in the financial sector.

“In everything we do we will consider harmful practices within the financial system, particularly where they impact those who are vulnerable, including our Indigenous communities. We will take regulatory action to ensure consumers in financial hardship are treated fairly and that financial services providers act responsibly and with accountability.”

There was a 21% increase in the number of ASIC enforcement investigations between February last year and last month.

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