Home / Regulatory & Government / FSI response receives cautious welcome
26 October 2015
The Turnbull Government has accepted most Financial System Inquiry recommendations, which will be implemented “in stages over the coming years”, according to Treasurer Scott Morrison.
One key measure is ensuring consumers receive “professional and fair treatment from advisers and financial product and service providers”.
“The Government will raise professional, ethical and education standards for financial advisers,” Mr Morrison said.
“Subject to transitional arrangements, advisers will be required to hold a degree, pass an exam, undertake continuous professional development, subscribe to a code of ethics and undertake a professional year before they can advise clients.”
The Government has promised to hold a “roundtable with key stakeholders” to discuss professional and educational standards.
National Insurance Brokers Association (NIBA) CEO Dallas Booth is concerned his members may be caught in the “financial advisers” net.
“NIBA is taking steps to clarify whether these [education] requirements will apply to general insurance brokers,” he said.
NIBA is also concerned about how the Government’s intention to strengthen product issuer and distributor accountability will affect brokers.
“The Government will implement recommendations that will require product manufacturers (insurers) and distributors (brokers and others) to take responsibility for the design of those products, and the impact the products will have on the target consumers,” Mr Booth said.
He welcomes the Government’s commitment to undertake “detailed consultation on the development of these new legal principles” and other proposed regulatory changes, noting “many of the proposed reforms… will be quite technical when it comes to implementation”.
“As always, the devil will be in the detail, especially in relation to the proposed new obligations on product manufacturers and distributors,” Mr Booth said.
The Insurance Council of Australia (ICA) says it’s pleased the Government “accepts that the overall regulatory settings for general insurance are satisfactory and require little intervention”.
The inquiry report makes just one recommendation relating specifically to the general insurance industry, which is to improve guidance including tools and calculators, and disclosure, especially on home insurance.
“The Government agrees to support industry-led initiatives, including supporting specific proposals put forward by industry, to increase guidance and disclosure in general insurance, recognising that work is already under way,” the government says in its response.
ICA established its Effective Disclosure Taskforce in July. Led by insurance lawyer Michael Gill, it is examining the role of disclosure documents and consumer experience, including guidance, sum-insured calculators and advice provided by insurers when people buy products.
Mr Whelan believes “several” other recommendations to be implemented by the Government may have “significant implications for insurers and their customers”.
ICA supports the recommendation to strengthen product issuer and distribution accountability, but argues “such an obligation is [not] necessary for general insurers, nor would it provide practical consumer benefit”.
It is also concerned at the recommendation for the Australian Securities and Investments Commission (ASIC) to have product intervention power, to enable it to modify or ban harmful financial products where there is a risk of significant consumer detriment.
The Government has promised “detailed consultation with stakeholders” before finalising the new power’s terms.
“ASIC and the general insurance industry already have a co-operative and constructive dialogue in relation to compliance issues,” Mr Whelan said. “ICA… will seek to ensure any intervention measures are restricted to exceptional circumstances and significant breaches of the law.”