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'The age of disclosure is over'

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Financial services product disclosure laws have failed to protect consumers as intended, a study by the Australian Securities and Investments Commission (ASIC) has found.

Insurance featured in several of the 33 case studies that ASIC examined in the joint report with the Dutch Authority for the Financial Markets. The case studies in Australia, the UK, the US and the Netherlands go back more than 10 years.

ASIC Commissioner Danielle Press, who spoke at the National Insurance Brokers Association convention last week, reaffirmed the regulator intends to use more of its expanded powers to protect consumers.

“We all need to shift away from an over-reliance on disclosure to protect consumers,” she told the convention a day after the report was released last Monday.

“Disclosure is necessary but not sufficient. Instead of over-relying on disclosure we will look to use targeted powers like the product intervention power more often.

“Our new product intervention power and the design and distribution obligations will be vital to the protection of vulnerable consumers by stopping significant consumer detriment and ensuring that financial products which are designed for and sold to consumers, meet the particular needs of those consumers and achieve fair outcomes for them.”

In one of the case studies involving home insurance, just 41% of participants provided with the “simple” key facts sheet chose the best product. The result was the same when another group of participants was given the more extensive product disclosure statement (PDS).

“The results showed that many participants were not able to select the best option, even in these idealised ‘quiet’ circumstances – isolated from the busy context of the real world, including the many distractions, demands and influences that affect our decisions and behaviour,” the joint report says.

The Insurance Council of Australia this year released an action plan to improve the disclosure regime, one that spokesman Campbell Fuller says “aims to maximise the effectiveness of product disclosure but also recognises the insights that can be gained from behavioural science”.

“In this regard, the Insurance Council is advocating for the Government to undertake a review,” he told insuranceNEWS.com.au.

The Consumer Action Law Centre says the ASIC report shows “the age of disclosure is over”.

“This excellent report confirms what consumer advocates have long known. We cannot rely on disclosure to ensure people are sold fair, safe, and valuable insurance products,” Senior Policy Officer Cat Newton told insuranceNEWS.com.au.