A new Australian Securities and Investments Commission (ASIC) working group will monitor what it says is an increased risk of consumers being “exploited through misleading or fear-based advertising” in insurance.

ASIC’s newly released Interim Corporate Plan for 2020/21 updates the regulator’s current priorities and its response to COVID-19 issues.

ASIC says cover exclusions and limitations may be introduced into new insurance policies at renewal in “response to current and emerging risks.”

“There is a risk that some products may no longer meet policyholders’ needs or expectations, particularly if these are not clearly communicated,” the Corporate Plan says.

The plan details ASIC’s intentions under three insurance categories: claims-handling, mis-selling and hardship assistance.

ASIC will engage with the industry and collect data relating to COVID-19 claims when the immediate operational effects of the pandemic subside and use its regulatory tools – including enforcement action -- to “deter claims handling-related misconduct and ensure insurance claims are processed with utmost good faith”.

The regulator has also pledged to “take swift action to deter mis-selling of unsuitable insurance products and punish breaches of the law.”

It will monitor the design and sale of poor-value insurance products, use of unfair contract terms and distribution practices that may breach the law, such as outbound sales calls.

ASIC will also set expectations for insurers on providing flexibility for consumers experiencing financial hardship and inform consumers about the risks of cancelling or reducing insurance.

Regarding natural disasters and Consumer Credit Insurance (CCI), ASIC says detailed data requests will be deferred until further notice, though insurers should be prepared to respond to future data collection notices.