The National Insurance Brokers Association of Australia (NIBA) has made a submission to treasury in response to the Government’s Design and Distribution Obligations and Product Intervention Power Proposals Paper, released in December 2016.
The submission was to give feedback on the implementation of measures suggested by the Financial System Inquiry (FSI), Improving Australia’s Financial System 2015.
The submission has addressed NIBA’s concerns that the Proposals Paper does not discuss key areas of consumer protection that are unique to insurance, and are highly relevant to the overall thrust of the recommendations and proposals that are being put forward.
It was noted in the submission that, Australia already has a comprehensive legal and legislative regime for insurance law and insurance contracts. This followed a thorough review of insurance law in this country by the Australian Law Reform Commission in the early 1980’s. Australia has led the common law world in the development of a modern legal framework for insurance law since the enactment of reforms that followed the ALRC’s Reports.
The Proposals Paper sets out an entirely new legal regime relating to the design and distribution of financial products and services. NIBA’s view is that if the proposed regime is to be applied to insurance contracts, the current legal and legislative regime needs to be examined and assessed, and the impact of the proposed laws on the current insurance law framework needs to be carefully considered.
The Insurance Contracts Act and associated Regulations already have a range of provisions for stand forms of cover for personal lines insurance policies. Rather than implementing an entirely new legal regime on top of the current provisions, NIBA believes it is timely to carefully review the operation and effectiveness of the standard form of cover provisions.
Rather than applying a whole new legislative regime to an area where there is no demonstrated need for “reform”, it would seem preferable to examine the existing product and consumer protection provisions, and ASIC powers, and to make changes only if and when there is a clear and demonstrated need to do so.
The Financial System Inquiry did not appear to consider the specific and comprehensive product and related provisions in the insurance laws of Australia. It is not at all clear that further substantial and substantive reform of the duties and obligations of insurance companies and the distributors of insurance products is warranted.
NIBA stated in the submission that before new powers are implemented, there needs to be a careful analysis of the existing powers, and the identification of a clearly demonstrated problem or gap, before new powers created. NIBA does not believe the Proposals Paper or ASIC have done this. You can read the entire submission here.