A Treasury bill that would overhaul the way financial products including insurance are sold has been backed by the Senate Economics Legislation Committee.

Insurers have previously raised concerns over the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018.

They say changes such as making it mandatory to state a product’s intended target market may result in increased costs that will inevitably be passed on to consumers.

Insurance Council of Australia (ICA) spokesman Campbell Fuller says the industry body will “provide further feedback during consultation about the regulations”.

“The Insurance Council has raised its concerns about the bill with the Government,” he told insuranceNEWS.com.au. “ICA is seeking to prevent outcomes that could be detrimental to consumers and to the general insurance industry’s capacity to provide relevant and innovative products to the market.”

Last month ICA Policy Regulation GM John Anning told the committee premiums will rise because the changes will add to the cost of re-collecting policy information at each renewal.

But the committee sees it differently.

“There was concern that the bill would apply the design and distribution obligations to renewals of policies that would formerly have been automatic,” it says in its report supporting the bill.

“This would involve unnecessary (possibly large) costs and could lead people to drop policies and be left underinsured.

“The committee notes that draft regulations with the effect of including and excluding specific products have already been published. It believes this step-by-step approach is appropriate, and that the industry must be ready for continual refinement of the bill.”

The National Insurance Brokers Association says little guidance has been provided on how a target market is to be defined, and dealing with the new arrangements will pose difficulty since many insurance policies have a location-specific element.

Again, the committee has a different view on this.

“The committee appreciates that industry does not yet know what the rules about content of target market determinations will be, but observes that [the Australian Securities and Investments Commission] cannot publish guidance before the legislation is in place.”