On 22 June 2015, the Australian Prudential Regulation Authority (APRA) released a letter to all Chief Executive Officers (CEOs) of general insurers, Level 2 insurance groups and life companies (collectively, the insurers) encouraging them to adopt better public disclosure practices for prudential matters. The current capital adequacy framework for insurers is based on a three … Continue Reading
Credit card providers have agreed to provide customers with clearer information regarding when ‘complimentary’ travel insurance is activated and to what extent cover is provided. Many credit card holders have access to ‘complimentary’ travel insurance. However, many of these do not know that they have the benefit of cover, how to activate it, how it … Continue Reading
In a move likely to be welcomed by the general insurance industry, ASIC has proposed to maintain the relief provided for distributors of general insurance products. A few short years after the introduction of the new financial services regime in Chapter 7 of the Corporations Act 2001 (Cth), ASIC began to appreciate the special nature … Continue Reading
With the flood of recent natural disasters, APRA has clarified the type of aggregate reinsurance arrangements that require its approval. Accordingly, it is timely for insurers to review their reinsurance arrangements to determine whether such approval is required. In recent years, Australia and New Zealand have amply demonstrated their propensity for catastrophic losses flowing from … Continue Reading
We are on the cusp of a new era in the evolution of the financial services industry. New technology, data analytics and behavioural economics are promising to revolutionise the customer experience. If the regulators remove the regulatory barriers, then using multi-media to deliver mandated and voluntary disclosure in different formats and through different devices will … Continue Reading
Technology led innovation can cause much indigestion for conduct and prudential regulators as they try to find the right regulatory pigeion hole for innovators in their regimes that were not built to handle such innovation. It is this disruptive impact of innovation that is shaping the regulation of tomorrow. Numerous conduct regulators around the world have acknowledged that a mandatory … Continue Reading
The Federal Government’s novel approach to tackling housing insurance affordability issues in North Queensland continued this week with the unveiling of ASIC’s home insurance comparison website. Replete with disclaimers and emphasising product features over policy price, the website is intended to aid consumer understanding and decrease underinsurance in a market struggling under flood and wind … Continue Reading
The Australian Securities & Investments Commission (ASIC) has continued its campaign for improved disclosure by insurers and their agents – this time in the motor vehicle insurance sphere. On 26 February 2015, ASIC published a report that examines the operation of no-claims discount (NCD) schemes for motor vehicle insurance and concluded that the schemes do not … Continue Reading
ASIC has recently released its quarterly enforcement report detailing enforcement outcomes between 1 July 2014 and 31 December 2014. The report addresses the range of criminal and civil action taken by the regulator, and highlights action taken against companies and directors resulting in criminal charges which were most significant during the period. In addition, significant … Continue Reading
A spate of natural disasters in recent years has revealed a concerning level of underinsurance in the home and contents insurance market, according to reports released by ASIC in late 2014. ASIC has called on insurance providers ‘to implement measures that will meaningfully improve consumers’ understanding of their policy, and help ensure consumers buy a … Continue Reading
The FSI referred to studies undertaken after natural disasters revealing inadvertent underinsurance due to consumers struggling to make an informed decision about the sum insured. Survey results highlight that even when consumers take the time to read insurance documentation, including the product disclosure statement, many misunderstand it, scan it briefly due to over-reliance on sales … Continue Reading
The FSI has recommended that the competency of financial advice providers be raised and an enhanced register of advisers introduced. The Government is currently considering mechanisms to raise minimum education requirements for financial advisers and the FSI recommends that this be prioritised. The FSI found that the minimum standards are currently too low which affects … Continue Reading
The FSI identified the need to better align the interests of financial services providers with those of consumers to ensure better consumer outcomes. The following strategies have been recommended to address some underlying issues: Raising standards of conduct and levels of professionalism: This aims to address concerns regarding organisational cultures that do not focus on … Continue Reading
The FSI has recommended that ASIC be granted a product intervention power to enable it to take a more proactive approach to reducing the risk of significant detriment to consumers. Specifically, this new power would allow the regulator to intervene to require or impose: amendments to marketing and disclosure material; warnings to consumers, and labelling … Continue Reading
The FSI shares concerns raised by ASIC that consumers are buying products that do not match their needs. The existing regulatory framework relies heavily on disclosure, financial advice and financial literacy. However, disclosure can be ineffective for a number of reasons, such as complexity of documents and misaligned interests. The FSI also considers that current … Continue Reading
The release of the final report of the Financial Systems Inquiry (FSI) brings us a step closer to a significant shift in conduct regulation in Australia. As we have previously reported, Australia seems set to join a UK and European trend away from regulation driven by disclosure towards an approach where product providers bear the responsibility … Continue Reading
As with the Murray Inquiry’s Interim Report, the Final Report highlights cyber security and technology related fraud risks as an emerging trend for the financial services industry that presents many challenges. At the forefront of the risks that arise is the rapid pace of technological change that is occurring within the financial system and how … Continue Reading
The Murray Inquiry’s Final Report strongly endorsed facilitating innovation in the financial services industry and technology neutral approach to regulation of financial services providers. The Report recommends the establishment of a permanent public–private sector collaborative committee, the ‘Innovation Collaboration’, to facilitate financial system innovation. This is similar to the ‘Innovation Hub’ initiative by the UK’s … Continue Reading
The Murray Inquiry’s Final Report was a mixed bag for the super industry, with some recommendations going some way toward addressing the needs of industry and consumers but with many of the hard decisions left for another day and another review. Improving efficiency The Inquiry clearly has reservations about the effectiveness of the Stronger Super … Continue Reading
After recently releasing a consultation paper aimed at facilitating innovative financial services disclosure (see our previous blog), ASIC has announced a joint industry project to develop such innovative disclosure. As part of the project, ASIC will work with AMP and Vanguard to develop and user-test a short, online ‘key facts’ sheet and a self-assessment tool … Continue Reading
Is your professional indemnity insurance adequate? If not, you may be jeopardising your Australian Financial Services Licence (AFSL) and in turn your entire business. ASIC recently cancelled a number of AFSLs due to inadequate professional indemnity arrangements. This is despite changes to the law that have been with us for more than a decade. Since … Continue Reading
