A number of significant reforms are now in effect that members need to take reasonable steps to comply with
The National Insurance Brokers Association (NIBA) has reminded brokers that from October 2021, a number of significant reforms come into effect that members need to take reasonable steps to comply with.
Incoming NIBA CEO Philip Kewin said, “We strongly urge insurance brokers to be across these reforms, these are important changes that all insurance brokers will need to understand, and apply in their businesses. NIBA will continue to share guidance when needed.”
The changes relevant to general insurance and intermediaries are:
New breach reporting obligations – Corporations Act – 1 October 2021
The new breach reporting obligations change the existing licensee breach reporting regime and create “reportable situations” that will either be automatically reportable to the Australian Securities and Investment Commission (ASIC), or only reportable if there is a breach of a newly defined concept of ‘core obligation’ that is significant. Breaches of a core obligation will be deemed significant in some cases and in other cases need to be considered against a significance test.
Licensees need to update breach reporting documents and procedures to comply with these obligations. ASIC guidance is available here.
New deferred sales model (DSM) for add-on insurance – ASIC Act – 5 October 2021
This reform applies a new DSM for defined ‘add-on insurance products’ i.e. essentially insurance sold to consumers, as defined in the Act, in connection with a principal product or service that covers risks that relate to that product or service (subject to certain carve-outs). ASIC guidance is available here.
Anti-hawking changes – Corporations Act – 5 October 2021
The reform changes existing s992A to provide for a new broader anti-hawking regime in relation to retail clients. It provides that a person must not offer a financial product for issue or sale to a retail client, or invite the client to ask or apply for a financial product or to purchase a financial product, if the offer, request, or invitation is made in the course of, or because of, unsolicited contact with the client, unless one of the exceptions apply. ASIC guidance is available here.
New design and distribution obligations (DDO) changes – Corporations Act – 5 October 2021
The DDO changes introduce principles-based design and distribution obligations on insurers and other regulated persons (e.g. agents of insurers and insurance brokers, and other distributors) in relation to the retail client insurance business.
More information is available on the Treasury website.
IDR requirements changes – Corporations Act – 5 October 2021
These changes affect a licensee’s IDR obligations. ASIC RG 271 imposes certain ‘enforceable’ obligations and provides other ‘guidance’ to help firms comply with their legal obligations. ASIC has broadened the definitions of ‘complaint’ and ‘small business’, and imposed a new obligation to comply with the requirements rather than just having the procedures in place.
Licensees must review and update their IDR procedures and documents to address these changes. ASIC guidance is available here.
Change to Insurance Contracts Act pre contractual duty of disclosure and misrepresentation regimes – Insurance Contracts Act – 5 October 2021
Insurance brokers need to identify how they will assist clients in understanding and meeting the new duty, and update their procedures and documents in this regard. No ASIC guidance is available at this time.