In further revolutionary changes to the insurance industry after the Financial Services Royal Commission final report, the Australian Securities and Investments Commission (ASIC) has recently released a brand-new regulatory guide (RG 275), as well as publishing ASIC (Information under the Deferred Sales Model for Add-On Insurance) Instrument 2021/632. Within this publication, insurance providers have received stipulations in regard to information needed to be provided to the customer, the form and manner upon which that information needs to be offered, and the necessary procedures to begin a prescribed deferral period before the sale of any add-on insurance products. This comes under the Deferred Sales Model outlined in Subdivision DA of Division 2 of Part 2 of the ASIC Act.
Within RG 275, there is a breakdown of the particular add-on insurance products that are subject to this deferred sales model, as well as all of the providers who need to ensure they comply with its requirements. This deferred sales model announces a compulsory break of four days that needs to be observed between the initial sale of the principal product and/or service, and the subsequent sale of any add-on insurance products. In fact, for insurance providers to sell these add-on products, they must satisfy this paused deferral period as stated in subsection 12DP(1) of the Act.
What Changes with ASIC’s RG 275 & Deferred Sales Model for Add-On Insurance
The deferred sales model was first introduced by Parliament in December 2020 before coming into effect on 5 October 2021. It was brought about by further findings in the Financial Services Royal Commission final report of improper practices in the add-on insurance market, leaving consumers lumbered with ‘junk’ products sold to them under unfair tactics resulting in inferior claims outcomes.
With these recent changes outlined under section 12DO, insurance providers will be unable to sell their add-on products to their customers unless the four-day deferral period has been completed. Within this process, there is also a set of prescribed information that needs to be communicated to the customer, either in the form of electronic communication, or in a hard copy format. To make things somewhat simpler, electronic communication is the instrument’s default option, provided of course that the provider is assured the customer will receive it.
Significant Changes to the Industry After the Financial Services Royal Commission Final Report
The Financial Services Royal Commission found a slew of misconduct within the banking, superannuation and financial services industry. As such, insurance providers across Australia have been the recipients of sweeping new regulations to make the environment more equitable for customers. Alongside the new deferral period for add-on insurance products, providers are now also required to report to ASIC any breaches they have made within their obligations as licensees of Australian Financial Services, as well as design and distribution obligations, anti-hawking rules, and the necessities around duty of disclosure in regard to gathering the appropriate information for their customers in order to properly assess insurability and calculating premiums.
These changes are supported not only by Commissioner Kenneth Hayne from the Royal Commission, but also the Insurance Council of Australia (ICA). CEO Andrew Hall was quoted saying these are ‘once-in-a-generation regulatory reforms to improve consumer outcomes.’
Learn More On the New Deferred Sales Model for Add-On Insurance Products & Other Changes from the Financial Services Royal Commission with Get My Refund
Countless customers across Australia are searching for ways to get back the money owed to them by these insurance providers who have engaged in unfair practices. At Get My Refund, we are specialists working directly for our clients to reclaim their money after being sold junk insurance and financial products. Should you like to learn more about the recent deferred sales model for add-on insurance products from ASIC, and how recent changes off the back of the Financial Services Royal Commission final report might affect your position and capabilities to receive a refund, please do not hesitate to contact us today by calling (02) 9156 1000.