The Australian Securities and Investments Commission (ASIC) has released a new guide on advertising financial products and warned it is monitoring traditional and new media.

Regulatory Guide 234 contains several examples of insurance advertisements that ASIC has objected to on the grounds that they do not accurately represent the product or its key features and risks. The guide is intended to help financial services companies comply with the law.

In one instance an insurer advertised the option to pay an insurance premium on a monthly basis using terminology such as “Cut your car insurance into 12 easy monthly payments”.

The explanatory guide says ASIC “raised concerns that this could give the impression that the annual premium is simply split into 12 payments, whereas the total of the 12 payments was more than the price the consumer would pay if they opted to pay annually”.

“Even if the advertisement included fine print stating that the sum of 12 monthly premiums is more than the option to pay an annual premium, the strength of the headline claim would be significantly greater than that of the fine print and would convey a dominant message to consumers. 

“We wrote to the insurance industry to outline our concerns about this type of advertising.”

ASIC also warns of misleading comparisons, saying an insurance policy that offers a reduced premium but has a higher excess should not be compared with another policy on the basis of the premium without considering the excess on each policy.

The guide says ads should also be consistent with product disclosure documents that are provided later.

“One advertisement for insurance used phrases such as ‘guaranteed acceptance’ and ‘no exceptions’, although the policy, in fact, had significant exceptions.

“ASIC took action on the basis that an advertisement should not imply that clients will definitely be paid in certain situations if the policy’s terms contain limits on when claims will be paid out.”

ASIC says the insurer agreed to pay out all benefits where a claim had been rejected due to exclusions not mentioned in the advertisement.

The guide says care should be taken in the use of words such as “free”, “secure” and “guaranteed”, so that unreal expectations are not created.

“Advertisements for financial products should give a balanced message about the returns, benefits and risks associated with the product.”

RG234 applies to social media such as Twitter and video streaming as well as traditional media, and ASIC Commissioner Peter Kell says the regulator will review ads regularly, including in regional and rural areas.

Since July 2010, ASIC has forced 117 advertisements across the financial services sector to be withdrawn or remedied in response to concerns about poor practices and potentially misleading or deceptive conduct.

“The outcomes we will aim for when confronted with suspected breaches will involve potentially stronger penalties than we have sought in the past,” Mr Kell said.

The regulator can issue stop orders, public warning notices and seek civil financial penalties of up to $1.1 million.

Mr Kell says one of ASIC’s priorities this year is to see that consumers are confident and informed.

“We want to see increasing consumer understanding of key concepts such as risk and reward. We want to ensure that the bad apples and poor products are removed from the industry.”