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. Hawking of financial products: Complex new provisions relating to the “hawking” of insurance products will take effect on 5 October. 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 and will provide further information to members in relation to these changes. 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 changes relate to insurance contracts entered into on or after 5 October.
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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. 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, travel insurance purchased after the purchase 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. 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 their 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 via the Media Hub on the new NIBA website under “Members only content”. The requirements only apply to complaints received on or after 5 October. For complaints received by firms before 5 October 2021, Regulatory Guide 165 Licensing: Internal and external dispute resolution applies. New breach reporting obligations: These changes strengthen the breach reporting regime for financial services licensees, by replacing the current reporting obligations. Under the new licensees, licensees will be required to notify ASIC within 30 days after the AFS Licensee first knows, or is reckless with respect to whether, there are reasonable grounds to believe a reportable situation has arisen. A reportable situation arises when: • the licensee or its representative has breached/or is likely to have breached a core obligation and the breach is significant; • the licensee has commenced an investigation into whether the licensee or representative has breached a core obligation and the breach is significant and the investigation has continued for more than 30 days; or • in the course of providing a financial service, the AFS licensee or representative has engaged in conduct constituting gross negligence; or committed serious fraud.
