The Insurance Council of Australia (ICA) is giving evidence at the Senate Economics Legislation Committee hearing today on the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018.
The representative body has has expressed reservations and concerns in its submission about the obligations, as currently drafted in the Bill. The ICA believes that the obligations will hinder rather than improve the likelihood that consumers buy insurance suitable for their needs, “Furthermore, we fear that this will be accompanied by consumers having to face greater complexity when making decisions regarding the buying and renewing of policies. The Bill’s provisions in relation to design and distribution do not seem to have been designed to mesh easily with the unique characteristics of general insurance products.”
The ICA submission states that general insurance is not usually purchased “off the shelf”; in that consumers are given options to tailor policies to suit their individual needs. Key aspects of retail policies include the sum insured amount, the excess level, the level of coverage, and who is covered, are choices that consumers make. As such, home and motor policies are generally designed for mass markets of consumers, and an appropriate target market would usually be broadly characterised.
The industry body maintains that as currently drafted, there remains substantial ambiguity around how the obligations contained in the Bill are intended to apply to mass marketed retail products. The ICA submission stressed that the Bill requires refinement to ensure that it applies sensibly to the general insurance industry and recommends that the Bill and EM are amended to:
i) include an explicit objective for the product design obligation to apply in a scalable and proportionate manner; and
ii) ensure that the distribution obligation does not interfere with efficient and effective policy renewal processes.
NIBA has expressed similar apprehensions and is giving very careful consideration to the hearing and will advise brokers of any developments that affect them.