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NEWS / Upcoming Regulatory Changes
UPCOMING REGULATORY CHANGES
October is fast approaching and with it a raft of sweeping regulatory changes that all brokers need to be aware of. These changes will affect almost every broker, so it is critical that NIBA members have a thorough understanding of the changes and the impact they will have on their business.
Reference checking and information sharing: The new provisions will require AFS licence holders to comply with new reference checking and information sharing protocols which will shortly be released by ASIC. These requirements will apply to authorised representatives of life risk brokers, and do not apply to representatives giving advice only in relation to general insurance products. The new rules take effect on 1 October 2021. Hawking of financial products: Complex new provisions relating to the “hawking” of insurance products will take effect on 5 October 2021. The provisions do not apply when an insurance broker is giving personal advice to a retail client, but they will apply to insurance brokers operating under a general advice model. The provisions will prevent the unsolicited marketing and sale of financial products to retail clients. The definitions and concepts are difficult and complex, NIBA is currently seeking clarity from Treasury on a number of issues relating to the proposed provisions and will provide further information to members once these matters are resolved. Duty to take reasonable care not to make a misrepresentation: These reforms relate to a newly defined category of “consumer insurance contracts”. They apply to insurance obtained wholly or predominantly for the personal, domestic, or household purposes of the insured. Where the new definition applies, the insured only has a duty to take reasonable care not to make a misrepresentation to the insurer before entering the consumer insurance contract. The
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changes relate to insurance contracts entered into on or after 5 October 2021. For non-consumer insurance contracts, the existing provisions in sections 21 and 22 of the Insurance Contracts Act (duty of disclosure obligations and misrepresentation provisions) apply. NIBA will provide more information on these reforms to members. Design and distribution legislation: The new legislation requires every financial services product covered by the regime to have a corresponding ‘target market determination (TMD)’. The products captured under the regime include all products that currently require a Product Disclosure Statement. It is crucial that broker firms who use “broker wordings”, or their own schemes where the broker has been involved in the design of the policy and the development of the cover that is provided, work closely with the insurer/underwriter to determine how the Design and Distribution obligations will operate in respect of those policies, who will be responsible for the preparation of the Target Market Determination, and how the product review obligations will be implemented. NIBA strongly encourages firms to obtain legal assistance for this process, in order to ensure they are meeting the new legislative obligations. There is no room for complacency, the legislation will take effect on 5 October 2021. ASIC has released a regulatory guide, RG 274 Product design and distribution obligations, outlining their interpretation of the obligations, compliance expectations and its approach to administering the obligations.
Deferred sales model for add-on insurance products: These reforms implement an industry-wide deferred sales model for add-on insurance products. The legislation introduces a complex array of obligations which defer the insurance transaction for a period of four days. The legislation applies to any insurance product sold incidentally to a primary good or service – e.g. insurance sold in conjunction with the rental of a motor vehicle or travel insurance sold after the sale of a travel product. The reforms do not apply to comprehensive motor insurance, or products recommended by financial advisers in a very limited personal advice situation. NIBA is currently liaising with Treasury to seek exemptions for a number of broker products where the immediate supply of cover provides genuine protection for consumers. The legislation is due to take effect on 5 October 2021. ASIC Regulatory Guide 271 – Internal dispute resolution: It is a condition of every AFS licence that the licence holder have a system for managing and resolving complaints and disputes, preferably before they are elevated to AFCA. ASIC has issued a new regulatory guide, RG 271 Internal dispute resolution, setting out its dispute resolution standards and requirements. A number of the standards and requirements set out in the RG are enforceable, so it is critical that members are aware of the new obligations. NIBA has previously provided information to its members on this issue, which can also be accessed from the media hub on the new NIBA website under “Members only content”.
