The industry is ready for a raft of new regulations that are commencing this month, having made “sweeping” changes to their systems and processes in readiness for the Hayne-backed reforms.

New breach reporting obligations started last Friday, requiring insurers to report to the Australian Securities and Investments Commission (ASIC) any significant breaches of their obligations as Australian Financial Services licensees.

Tomorrow will see the introduction of design and distribution obligations (DDO) laws, a deferred sales model for add-on products, anti-hawking rules and a new duty of disclosure regime that places the burden on insurers to obtain all necessary information to assess insurability and the premium calculation.

“The Insurance Council supports the intention of these once-in-a-generation regulatory reforms to improve consumer outcomes,” CEO Andrew Hall said.

“Insurers have worked hard to ensure the necessary changes to processes have been made and staff are appropriately trained.

“Pleasingly, the Government and its agencies have taken on board much of our feedback and have been open to changes that avoid unintended consequences from aspects of the new regulatory regime.

“We look forward to continuing that dialogue as the new arrangements are bedded down and better understood in practice.”

ICA says the General Insurance Code of Practice will be updated from tomorrow to align with ASIC’s updated Regulatory Guide RG 271 on internal dispute resolution.

Updates include a reduction from 45 to 30 days to resolve a complaint, as well as a revised definition of a complaint. Changes also include a new commitment to improved customer awareness through information on Code subscriber websites about the availability of financial hardship support.

ICA says the code changes have been developed following consultation with key stakeholders, including representatives of the ICA’s Consumer Advisory Committee, the Australian Securities and Investments Commission and Australian Financial Complaints Authority.

Here is the ICA summary of the regulatory changes:

October 1

Breach Reporting Obligations - Financial services firms including insurers are required to report to ASIC any significant breaches of their obligations as Australian Financial Services licensees.

The new regime aims to address concerns of uncertainty about when breaches are significant enough to report, and to improve the consistency of information provided by licensees in their breach reports.

Insurers support the Government’s breach reporting reforms. However they consider there is a further opportunity to reduce uncertainty for the industry and will be working through these issues with regulators and Treasury.

October 5

Deferred sales model - The deferred sales model for add-on insurance introduces a four-day pause between the sale of a primary product and the sale of an add-on insurance product, to help individual customers make informed decisions when purchasing insurance.

Anti-hawking - Working in conjunction with the deferred sales model, the anti-hawking restrictions put certain prohibitions on insurers offering products to consumers while selling other products.

Product Design and Distribution Obligations - Under these obligations insurers must design financial products that are likely to be consistent with the likely objectives, financial situation, and needs of the consumers for whom they are intended.

Duty not to make a misrepresentation - A duty to take reasonable care not to make a misrepresentation to an insurer places the burden on an insurer to elicit the information that it needs in order to assess whether it will insure a risk and at what price.