Industry faces more stop orders as ASIC steps up DDO surveillance
The Australian Securities and Investments Commission (ASIC) has stepped up its surveillance of industry compliance with design and distribution obligations (DDO) laws after an initial review of target market determinations (TMDs) found worrying practices.
The regulator is not ruling out more stop orders banning sales of products, similar to action already taken against some Hollard pet insurance brands.
“ASIC initially adopted a facilitative compliance approach when the DDO regime was implemented in 2021,” the regulator says in a letter to insurers.
“Our approach has shifted to closer scrutiny of design and distribution obligations with active supervision and enforcement.”
The initial review of more than 100 TMDs for general and life insurance products is the first such examination since DDO laws commenced in October 2021.
Under the DDO regime every financial product must have an accompanying public TMD statement setting out in sufficient detail that the product is appropriate for the target market and that the distribution conditions appropriately direct distribution of the product to that market.
“This initial review was a targeted, risk-based exercise, which focused on the TMDs of a sample of general and life insurance products considered by ASIC to be higher risk and/or to potentially provide low value to consumers,” ASIC says.
“ASIC is considering follow-up action arising from this initial review and ongoing scrutiny of general insurers’ compliance with the DDO regime more broadly.
“This includes pursuing targeted, risk-based surveillances and taking enforcement action when appropriate.”
ASIC says in an email to insuranceNEWS.com that it “can’t comment on specific surveillances but we are actively considering stop orders across a range of products, including life and general insurance products”.
“Consistent with the outcomes-based, consumer-centric objectives of DDO, ASIC takes a risk-based approach to TMD compliance, focusing on the potential for consumer harm rather than technical non-compliance,” the ASIC email says.