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New Regulatory Guide for the add-on insurance model

Friday 30 July 2021

 


The Australian Securities and Investments Commission (ASIC) this week released RG275 which provides guidance around customer information requirements for add-on insurance and the deferred sales model. 

Deputy Chair Karen Chester said in an official statement this week, “This is a key Government reform aimed squarely at improving consumer outcomes in the add-on insurance market. The pause in the sales process will give people time to consider the insurance they have been offered and compare it with alternatives. It will reduce the risk of people buying insurance on the spot that is poor value or just not right for them.”

Chester added that these reforms are just part of suite reforms by the government to help improve the insurance sector. 

This comes after the Royal Commission found that adds-on insurance was being ‘widely’ mis-sold, and insurers had to pay $290 million to customers who had been affected. 

The end of last year then saw the passage of the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, for which ASIC started consultation process in March and April of this year.

In an official statement in the securities and Investments said in an official statement, “The deferred sales model introduces a mandatory four-day pause between the sale of a principal product or service and the sale of add-on insurance. The deferred sales model was introduced by Parliament in December 2020, following a recommendation of the Financial Services Royal Commission (Royal Commission).”

This come after the Royal Commission in Banking and Financial Services found ‘numerous’ challenges in the add-on insurance market. 

“The timeframe for a decision on an exemption application to ASIC cannot be guaranteed. Without prior relief, applicants must prepare to comply with the deferred sales model from 5 October 2021.”

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