The Insurance Council of Australia (ICA) says serious concerns it raised about the product design and distribution reforms that passed Parliament this week were not addressed, and could lead to higher costs being passed on to customers.
“It remains unclear how design and distribution obligations will apply to financial products that are mass-marketed, such as home and contents insurance and motor vehicle insurance,” spokesman Campbell Fuller told insuranceNEWS.com.au today.
“This causes a number of problems, but ICA is particularly concerned about the impact on the renewal process. If insurers are obliged to ask again for customer information obtained the previous year, it will seriously inconvenience and frustrate customers.”
ICA says estimates provided to the Government indicated the new regime, if not applied sensibly, could increase ongoing costs for insurers by more than $250 million a year.
The laws require product issuers including insurers to specify appropriate target markets, while distributers must take steps to ensure they are sold accordingly.
The Australian Securities and Investments Commission (ASIC) also gains stronger powers to intervene if it identifies a risk of significant consumer detriment from the sale of a financial product.
Mr Fuller says ICA will meet with ASIC in the near future to discuss how regulatory guidance might resolve its members’ concerns.
An ICA submission last year raised concerns that the bill could hinder rather than improve the likelihood that consumers might buy unsuitable insurance.
“The bill’s provision in relation to design and distribution do not seem to have been designed to mesh easily with the unique characteristics of general insurance products,” it said in the submission.
ASIC says the design and distribution obligations will be phased in over two years and the reforms overall are critical in building trust.
“These new powers will enable ASIC to take broader, more proactive action to improve standards and achieve fairer consumer outcomes in the financial services sector,” Chairman James Shipton said yesterday.