Regulatory

ASIC initiates public consultation on IDR standards

ASIC has initiated public consultation on new standards in relation to the handling of consumer and small business complaints. The consultation covers the proposed updates to ASIC’s IDR standards (currently set out in Regulatory Guide 165 Licensing: Internal and external dispute resolution) and a proposed framework for mandatory IDR data reporting by financial firms to ASIC. Under the proposed changes to the IDR standards, financial service licensees will be required to: record all complaints, including …

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Plans unveiled for claims handling reform

The Government has released a consultation paper in response to the recommendation from the Financial Services Royal Commission that claims handling should no longer be excluded from the definition of ‘financial service’. A two-pronged approach has been proposed in response to this recommendation: Remove regulation 7.1.33 which currently excludes claims handling and claims settlement from constituting providing financial advice or dealing in an insurance product. Define the activity of handling or settling an insurance claim …

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Stronger penalties for corporate misconduct to be introduced

The Treasury Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018 (Bill), which introduces stronger penalties for corporate and financial sector misconduct, has been passed by the Senate. The Bill implements recommendations of the ASIC Enforcement Review Taskforce and will amend the Corporations Act, ASIC Act, National Consumer Credit Protection Act (and Credit Code) and the Insurance Contracts Act. While the Bill still needs to be formally approved by the House of Representatives, this is seen …

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ASIC focuses in on IDR processes

ASIC has released research exploring the customer experience of internal dispute resolution (IDR) procedures in the financial services sector. Financial services licensees have specific obligations around maintaining an IDR procedure. As well as reporting on statistics around complaints, the research identified that the following are common obstacles encountered by customers during the complaints processes: Structural obstacles – difficulty in finding the firm’s contact details to make a complaint. Transparency obstacles – not having the IDR …

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Life Insurance Code 2.0

The Financial Services Council has released a draft of the new Life Insurance Code of Practice (Code) for public consultation. This follows scrutiny of the industry, including sales and claims practices, during the round 6 hearings at the Financial Services Royal Commission. The draft Code builds on the existing code and is designed to lift standards in product design, sales, underwriting, customer service, complaints and claims handling. Chapter 1 places obligations on life insurance companies …

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ASIC proposes updates to organisational competence requirements for advice licensees

ASIC has proposed updates to Regulatory Guide 105 Licensing: Organisational competence (RG 105) that would see advice licensees required to have a responsible manager (RM) that meets a new Option 6 knowledge and skills requirement. Consultation Paper 305, released yesterday by ASIC, includes updates designed to support the professional standards reforms, which aim to lift the education, training and ethical standards in the financial advice industry. For the purpose of the Consultation Paper, ‘advice licensees’ …

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New mandatory reporting requirements on life insurance claims

The Australian Prudential Regulation Authority (APRA) has released the Life Insurance Reporting Standard LRS 750 Claims and Disputes with the aim of enhancing the consistency and quality of life insurance data. The data will be published through a program established jointly last year by APRA and the Australian Securities and Investments Commission (ASIC). With the introduction of the new reporting standard, it is now mandatory for life insurers to report data on claims and disputes. …

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ASIC corporate plan – what’s on the horizon for insurance

ASIC has published its Corporate Plan for 2018-2022. The plan articulates the regulatory actions ASIC proposes to take over 2018-2019. ASIC’s plan includes the following regulatory actions relevant to the insurance industry: Publishing the findings from ASIC’s review of life insurance direct sales and distribution to promote better practices. This has already occurred (read more about this here). Consulting on a deferred sales model for add-on insurance and other financial products sold through car dealerships …

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ASIC reviews insurance cover through superannuation

Following the release of its report into direct life insurance (see our blog entry on that here), ASIC has also released a report on the provision of insurance cover through superannuation (Report 591). Generally, superannuation funds offer their members one or more types of life insurance (such as life cover, TPD cover and income protection cover). 70% of all life insurance policies in Australia are held through superannuation funds. ASIC’s review of 47 superannuation trustees …

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ASIC’s review of direct life insurance – the results are in

Late last week, ASIC released Report 587 on the sale of direct life insurance, revealing that its has found that sales practices and product design are leading to poor consumer outcomes. Direct life insurance products are sold within a general advice or no advice model. Throughout 2017-18 ASIC has conducted a multi-stage review of the sale of direct life insurance, including term life, accidental death, trauma, total and permanent disability and income protection insurance. The …

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New EDR scheme established for financial services complaints

The Government has passed legislation which introduces a new external dispute resolution (EDR) scheme, known as the Australian Financial Complaints Authority (AFCA), to resolve disputes relating to financial services complaints. The establishment of AFCA means there will be a single scheme for all financial services and superannuation complaints. Currently there are three separate schemes: the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal. AFCA will have higher monetary …

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Draft legislation proposes design and distribution obligations for financial products

Late last year, the Government released an exposure draft of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2017 (Bill). The Bill seeks to introduce: design and distribution obligations for financial products to ensure such products are targeted at the right people; and a temporary product intervention power for ASIC when there is a risk of significant consumer detriment. Design and distribution obligations The design obligations apply to the offerors …

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ASIC review into direct life insurance results in customer refunds

ASIC has announced that ClearView Life Assurance Limited (Clearview) will refund 16,000 customers a total of approximately $1.5 million. This follows an ASIC review of Clearview’s life insurance sales practices. The review focused on sales to consumers residing in high Indigenous populated areas who were unlikely to have English as their first language. The sales were made directly to consumers, without personal financial advice. The review found that sales staff: made misleading statements about the …

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ASIC consults on add-on insurance reforms

ASIC is seeking feedback on proposals to reform the sale of add-on insurance through car dealerships. Consultation Paper 294 sets out ASIC’s approach and proposed reforms in detail. The reforms would see the introduction of: A deferred sales model ASIC proposes to introduce a deferred sales model which would insert a pause in the sales process for add-on insurance products. The proposal is that a period of between 4 to 30 days must elapse before …

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CCI sales process to be overhauled

ASIC has recently announced the establishment of a Consumer Credit Insurance (CCI) Working Group, who have been tasked with improving outcomes for CCI customers. The CCI Working Group will progress a range of reforms. A key reform will be the introduction of a deferred-sales model for CCI sold with credit cards over the phone and in branches. This means that banks will be prohibited from selling a CCI policy until at least four days after …

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