General insurers skirt advice issues
There may be a need for people buying general insurance to obtain a greater level of financial advice, but the insurers want to steer clear of the complexity of personal advice, according to a report from the key Insurance Council of Australia (ICA) Effective Disclosure Taskforce.
And to achieve this, a the Taskforce report, presented to the ICA this week, canvasses the Australian Securities and Investments Commission (ASIC) providing both regulatory guidance and even relief with respect to the provision of advice around general insurance.
The report, largely compiled by the Taskforce chairman, specialist lawyer, Michael Gill, makes clear that while general insurers have generally sought to meet their legal obligations with respect to product disclosure, this does not mean that consumers actually understand what they are buying.
In this context, it argues that a role exists for advice.
"More meaningful engagement with consumers will [also] be facilitated by a reconsideration of how the financial advice regime applies to the general insurance industry," the report said. "The Australian Securities and Investment Commission should provide regulatory guidance, and where necessary relief, to support the provision of guidance, and where required advice, to consumers purchasing general insurance products."
However it said the industry had long-argued that the current regulatory framework unnecessarily constrained its ability to provide simple product information.
"The current personal advice regime requires onerous training for advisers; a complex needs analysis; and the comprehensive documentation of any recommendations. Consequently, the majority of general insurance is sold on a ‘no advice' business model, or where advice is provided, care is taken that it falls within the less onerous definition of ‘general advice'," the report said.
It noted that Suncorp had recently commenced a project to review the current advice regulations and found that most messages that insurers wished to convey "can fall within all three advice models depending on the way it is expressed".
"The difference between information that is personal advice, general advice and factual information can be minute; a single word in some circumstances," the report said. "Compliance with the financial advice regime therefore inevitably focuses training for employees and agents on phrasing information so as to allow them to remain within the definition of the advice model they are operating under, rather than on delivering information that is of the most assistance to the consumer's inquiry."
"This can produce counterintuitive conversations driven by compliance needs rather than consumer needs."
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