General insurance agents want to be granted more flexibility to provide tailored information to consumers without triggering the personal advice rules.
In a submission filed with the Productivity Commission, the Insurance Council of Australia (ICA) has described the current regulatory regime around personal advice as “expensive and time-consuming” and something better suited to investment products than general insurance.
“The current regulatory regime around personal advice is expensive and time consuming,” it said. “This may be necessary for investment products, but seems overly cumbersome for general insurance.”
It said that, as a consequence, the majority of general insurance was sold on a ‘no advice’ business model, or where advice was provided, care was taken that it fell within the less onerous definition of ‘general advice’.
“The difference between information that is personal advice, general advice and factual information can be minute; a single word in some circumstances.,” the submission said. “Compliance with the financial advice regime therefore inevitably focuses training for employees and agents on phrasing information so as to allow them to remain within the definition of the advice model they are operating under, rather than on delivering information that is of the most assistance to the consumer’s inquiry.”
“This can produce counterintuitive conversations driven by compliance needs rather than consumer needs,” it said. “For example, in circumstances where product options have been explained and the consumer asks direct and personal questions such as ‘what should I do?’ it is difficult and counterintuitive not to personalise the response.”
The submission claimed that insurers also struggled to answer questions where consumers were seeking to validate a decision and said that once an insurer started to prioritise the types of information provided to individuals, questions about whether advice was being provided were triggered.
“The industry is not commonly called upon to provide complex advice. However, the fear of triggering the legal definition of personal advice hinders insurers from being more forthcoming in the guidance they provide. This results in a detrimental outcome for both industry and consumers.”
