ASIC consults on a deferred sales model for add-on insurance products

ASIC consultation on implementing a deferred sales model for add-on insurance products

Written on 17 March, 2021
Tanaya Das

The Australian Securities and Investment Commission (ASIC) has indicated that it is seeking stakeholder feedback on proposals for a Regulatory Guide and prescribed customer information for the forthcoming deferred sales model for add-on insurance.

The deferred sales model introduces a four-day pause between the sale of a principal product or service and the sale of an add-on insurance product.

Deputy Chair Karen Chester said, “This is a key Government reform flowing from the Royal Commission. ASIC is keen to help industry prepare for the new sales model which commences in October this year. We want to ensure this policy change improves consumer outcomes in the add-on insurance market. We welcome evidence-based feedback to our consultation.”

“The deferred sales model disrupts the sale of add-on insurance with a simple pause – allowing consumers the time to consider the merits of the insurance they’ve been offered and to compare with alternative products. Put simply, the deferred sales model supports consumer decision-making. It is important that its introduction is accompanied by design and distribution obligations. These changes will guide industry to remain focused on good product design, on selling to the right customers, and on fair sales practices.”

“We expect compliance with the deferred sales model from day one. We will not hesitate to take action in response to any failure to meet the new requirements. Better consumer outcomes and fewer sales of low-value or junk insurances will result from this reform.”

The deferred sales model was recommended by the Financial Services Royal Commission (Royal Commission) and has been implemented by amendments to the Australian Securities and Investments Commission Act 2001 (the ASIC Act) to commence on 5 October 2021.

ASIC is inviting feedback on:

  • draft Regulatory Guide 000 The deferred sales model for add-on insurance, which explains the scope of the deferred sales model, the obligations on add-on insurance providers and ASIC’s power to grant an individual exemption, and
  • ASIC’s proposal for the content, form and communication of information that must be given to customers to start the deferral period.

All interested stakeholders have until 23 April 2021 to provide the feedback, you can access more information about the consultation on the ASIC website.