An Australian Securities and Investments Commission (ASIC) report on consumer confusion around the difference between general and personal advice has highlighted the need for reform.

The Insurance Council of Australia (ICA) says clearer definitions would enable more effective discussion with consumers on issues such as appropriate levels of cover.

“ICA welcomes the ASIC report because it gives strength to calls to revise the definitions of financial advice in the Corporations Act,” spokesman Campbell Fuller told insuranceNEWS.com.au.

“These definition revisions would lead to clearer consumer outcomes.”

The ASIC-commissioned report – Financial Advice: Mind the Gap – uses independent research to highlight significant holes in consumer knowledge.

Only 53% of those surveyed correctly identified “general” advice, and even when provided with the general advice warning, almost 40% wrongly believed the adviser had an obligation to take their personal circumstances into account.

“This disturbing gap in understanding whether the advice they are getting is personal or not means many consumers are under the false premise their interests are being prioritised, when no such protection exists,” ASIC Deputy Chairman Karen Chester said.

The report focuses on issues in the financial advice and life insurance sectors, but concerns have previously been highlighted by the general insurance industry.

ASIC says the report is the first stage in a broader research project.

Further studies will start later this year to identify “a more appropriate label” for general advice and consumer-test the effectiveness of different versions of the general advice warning.

See ANALYSIS.