NIBA CEO Dallas Booth considers the possible implications for financial services broadly, and insurance more specifically, of the upcoming Federal Election.
“A Federal Election – in fact a full Double Dissolution election – has been called for Saturday 2 July 2016.
“The big question is: what does this mean for the financial services industry, and insurance brokers in particular? Well, depending on who wins, the outcomes are likely to be very different indeed.
“The Coalition Government has recently announced a range of initiatives to under the banner headline ‘Improving Consumer Outcomes in Financial Services’. This announcement repeats previously announced commitments from the Government, but contains a number of new initiatives. The main features of the announcement are:
- Increased funding for ASIC to enhance their data analysis and surveillance capabilities, and to modernise ASIC’s data management systems. The Government wants ASIC to use the best available technology to better detect financial sector misconduct.
- Implement key features of the Financial System Inquiry recommendations, including a product intervention power for ASIC, product distribution obligations – which will apply to insurers and brokers, and a review of the ASIC enforcement regime, to ensure it acts as an effective deterrent to misconduct.
- An industry funded “user pays” model for ASIC, to ensure the costs of regulation are borne by those entities that have created the need for it.
- Improvements in complaints handling, including a review of the small business jurisdiction of the Financial Ombudsman Service under its Terms of Reference. The Government is also going to establish a panel of eminent persons to review the role, powers and governance of the dispute resolution and complaints schemes.
“These reforms build on the already announced proposals to increase education and professional standards in financial services, and to regulate life insurance commissions.
“Overall, this is a major series of reforms. Some of the proposals will not affect general insurance brokers, as general insurance has been exempted from the proposed new requirements for education standards and similar requirements.
“Other proposed reforms could have a very significant impact on insurance brokers, including proposals for industry funding of ASIC, and the proposed new obligations on manufacturers and distributors of financial products and services to make sure the products are fair and appropriate in the hands of the client.
The ALP Opposition, the Greens and others appear to have lost faith in the capacity of the banks and life insurers to deliver good outcomes for consumers.
“On the other hand, the ALP Opposition has strongly committed to holding a Royal Commission into banking and financial services. If the ALP wins the election, I would expect most if not all the current Government’s proposals will be put on hold, and time will be taken to conduct a major inquiry into the concerns that have been raised by whistle blowers and senior journalists in recent times.
“The scope of the Royal Commission is not clear at the present time, and it is also unclear how long it will run and who will be involved. What is clear is that the ALP Opposition, the Greens and others appear to have lost faith in the capacity of the banks, life insurers and other sections of the financial system to deliver good outcomes for consumers. There have been too many examples of consumers being badly affected by these companies.
“The good news is the focus of attention is not on insurance broking. There have been some problems with certain individuals in the past 12 months, but there has been no widespread concern about the nature and quality of advice by brokers.
“I am sure it will be a long and torrid campaign. The outcome will be very interesting indeed.”