The Insurance Council of Australia (ICA) and Suncorp have urged the Federal Government to consider changing the advice regime under the Corporations Act to enable insurers to provide more flood risk guidance to direct customers.

In its submission to the Natural Disaster Insurance Review (NDIR), ICA says the current advice provisions under the Corporations Act “acts as a disincentive for insurers to offer advice to consumers due to cost and compliance uncertainty”.

It says the concept of scaled advice “is not providing much comfort as this concept is already in the Corporations Act and it is difficult to apply in real life”.

ICA says that the best interests test proposed in the Government’s Future of Financial Advice (FOFA) reforms, which are currently being consulted on, will act as a “further deterrent” to the offering of advice by insurers.

“The industry has previously submitted to FOFA that general insurers issuing/dealing in prescribed cover should be exempted from the advice provisions of the Corporations Act, specifically to encourage more direct general insurers to provide advice to consumers,” ICA says in its submission. 

Suncorp says in its submission that a “reconsideration” of the advice regime under the Corporations Act should take place to encourage insurers to move from a no-advice model to a model “which provides greater clarity to customers about their risks”.

It suggests the disclosure regime – and not just the oral component – should be reviewed in full for its effectiveness.

Suncorp also submits that FOFA should “revisit the practical issues surrounding personal advice for direct insurers to see if there is a legislative solution (other than scaled advice) that would encourage insurers to offer personal advice to consumers”.