The Insurance Council of Australia (ICA) has strongly supported “comprehensive reforms” to improve the quality of advice given to retail consumers.

“The current regulatory framework unnecessarily constrains the ability of licensees to provide simple product information,” it says in response to a Productivity Commission draft report.

The report on competition in financial services recommends renaming “general advice” to avoid misleading consumers into believing they are receiving “personal advice”, and requests input on further changes that may be needed.

ICA says the regulatory regime for personal advice is expensive and time-consuming, and while it may be necessary for investment products, it is overly cumbersome for general insurance.

“The fear of triggering the legal definition of personal advice hinders insurers from being more forthcoming in the guidance they provide. This results in a detrimental outcome for both industry and consumers.”

Training for employees and agents tends to focus on remaining within the rules of the advice model under which they operate, leading to counter-intuitive conversations with consumers that reflect compliance rather than needs.

ICA’s submission rejects the Productivity Commission view that having general insurers underwrite through a variety of different brands “creates the illusion of more competition than actually exists”.

“This is a misguided view that assumes there is no product differentiation and fails to properly consider how each brand operates and competes in the domestic market,” it says.

ICA also says its review of the industry code of practice is addressing a proposal for renewal notices to show previous-year premiums and percentage changes.

“Many insurers’ systems are not currently in a position to provide this information on every customer’s renewal notice,” it says.

“For this reason, we regard this as industry best practice and note that many insurers are progressing in this direction.”

The National Insurance Brokers Association (NIBA) says greater clarity is required on renewal price comparison information, to ensure it is not misleading.

“In all cases consumers should be advised to select insurance covers based on their needs and risks as opposed to making price-based decisions alone,” it says.

The industry groups are cautious about proposals for extending a deferred sales model to all add-on insurance products.

ICA says it has been working with the Australian Securities and Investments Commission on the proposal for sales through car yards, but areas such as travel insurance should be considered separately to reduce the risk of people being left without cover.

NIBA says add-on sales changes should also be reviewed as part of product design and distribution consultations under way, and they should take royal commission findings into account.