Recently, the chairman of the Australian Securities and Investments Commission (ASIC), Greg Medcraft, delivered a speech to the Insurance Council of Australia Forum on the current insurance environment and ASIC’s priorities for the coming year, with a focus on the insurance industry.
Mr Medcraft acknowledged that 2016 was an eventful year for the insurance industry, due to the increased public, media and government focus, as well as continued progress on law reforms in the industry.
Mr Medcraft noted that technology and social media has impacted the insurance industry as it now means that customers are more empowered than they were before. Consumers are now able to provide their feedback concerning businesses and their engagement with them through social media.
As a result of this consumer feedback, ASIC is continuing its investigation into life insurance (commenced during 2016) and that its focus on regulatory investigation will continue with a Senate Committee Inquiry into general insurance later this year. ASIC will also review whether the unfair contract terms protection in the Australian Consumer Law should extend to insurance contracts.
As a result of findings made following an industry review of life insurance claims handling practices released in October 2016, ASIC will focus its attention on claims management in 2017.
Another key area of review for the year will be in relation to the introduction of a new product design and distribution framework for financial products, and a product intervention power which will enable ASIC to take direct action to deal with any shortcomings in products or conduct, that results in consumer detriment. This will include a review of ‘add-on insurance’, such as add-ons sold through car dealerships.
ASIC considers that issuers of financial products (including general insurers) should be obliged to:
- Identify an appropriate target market for their products;
- Consider whether the product meets the needs of those individuals and is capable of being understood by them; and
- Select distribution channels that are likely to deliver the products into the hands of the individuals in the target market.
In light of this, ASIC is considering whether to implement a product intervention power which would enable it to take action on product features, the types of consumers who can access a product, and the circumstances in which they can do so.
Similarly, as part of the Government’s review of ASIC’s enforcement handling, it will be considered whether there will be more significant penalties for misconduct relating to insurance claims handling. ASIC considers that this will strengthen the regulatory framework for claims handling.
Given ASIC’s funding increase and its clear commitment to increasing enforcement, we anticipate that there will be a rise in regulatory investigations and scrutiny of insurers. ASIC has recommended that insurers carefully review the operation and disclosures of their products and claims handling processes in light of the regulator’s priorities for the coming year. We will continue to watch this space for any developments.