The National Insurance Brokers Association (NIBA) “is struggling to understand” how Treasury proposals requiring insurers to identify target and non-target clients can be practically enforced.

Consumers have varying risk requirements, and insurance policies on the market have different sets of significant features, it says.

“In the circumstances, we are not at all sure whether it is possible to determine what might be significant features of an insurance policy,” CEO Dallas Booth says in a submission.

“What would be regarded as significant will undoubtedly vary from consumer to consumer, and from risk to risk.

“NIBA is struggling to understand how a requirement of this nature could be created as a legal obligation, and how it would operate in practice given the very wide variety of risk scenarios in the community, and the wide variation in the ability of consumers to assess and understand the products that are being offered.”

The Government has accepted a series of recommendations from the 2015 Financial System Inquiry, including ensuring products are targeted at the right consumers and giving the Australian Securities and Investments Commission (ASIC) temporary product intervention power.

NIBA expresses a “serious concern” with giving ASIC such authority without first considering the effectiveness of the corporate regulator’s current powers.

“We fail to see how the rights of ASIC under the Insurance Contracts Act for a breach of the duty of utmost good faith, and the ASIC Act in relation to misleading or deceptive conduct, would not allow it to address systemic issues,” Mr Booth says.

“NIBA is also concerned that the proposals will give ASIC very wide, quite subjective powers to intervene in financial markets, where there may or may not have been a breach of the Corporations Act or other relevant law.”

Treasury’s proposal paper says product intervention power includes authority to impose additional disclosure obligations, require amendments to advertising documents and restrict or ban the distribution of a product.