The Australian Securities and Investments Commission (ASIC) has released a new regulatory guide and final customer information requirements as part of the implementation the new deferred sales model for add-on insurance.
RG 275 provided guidance to industry for compliance with the deferred sales model from 5 October, 2021.
There were exceptions which included financial advisers who provided “personal advice in circumstances where the best interests duty applied and the add-on insurance product relates to a principal product or service provided by the financial adviser that the financial adviser recommends in the course of providing the advice”.
The Federal Treasurer, Josh Frydenberg, previously announced there would be exceptions as part of the regime.
ASIC said it would continue to engage with industry in the lead up to the new laws commencing.
It followed consultation on the draft proposals with stakeholders (CP 339 ‘Implementing the Royal Commission recommendations: The deferred sales model for add-on insurance’).
As required by the reforms, ASIC made an instrument specifying the information that must be given to a customer to start the four-day deferral period, and how that information must be given.
The deferred sales model introduced a mandatory four-day pause between the sale of a principal product or service and the sale of add-on insurance.
The deferred sales model was introduced by Parliament in December 2020, following a recommendation of the Royal Commission.
The Royal Commission found numerous issues in the add-on insurance market, including poor-value products, unfair sales practices and outcomes, and worse claims outcomes than in other insurance markets.
Karen Chester, ASIC deputy chair, said this was a key government reform aimed at improving consumer outcomes in the add-on insurance market.
“The pause in the sales process will give people time to consider the insurance they’ve been offered, and compare it with alternatives,” Chester said.
“It will reduce the risk of people buying insurance on the spot that is poor value or just not right for them.
“ASIC’s work will help businesses prepare for the new sales model. The input we’ve received from industry and consumer representatives has been invaluable. It has enhanced our regulatory guidance and the customer information requirements.
“The deferred sales model is part of a suite of Government reforms in the insurance sector that will improve how insurance products are designed and sold, and how claims are managed.”