The Government response to the Financial Systems Inquiry has been met with positive reviews from the insurance industry.
The response, announced yesterday, saw the Government agree to all but one of the FSI recommendations as the insurance industry was put on the back-burner compared with banking and financial planners.
Recommendation 26 of the report concerned the improvement of guidance and disclosure in the general insurance industry and the Government agreed to back industry-led initiatives.
“The Government agrees to support industry-led initiatives, including supporting specific proposals put forward by industry, to increase guidance and disclosure in general insurance, recognising that work is already underway,” the final report says.
ICA CEO Rob Whelan, stressed that the industry has already launched measures designed to meet this criteria and praised the Government for their response to the report.
“The Government’s response supports industry-led initiatives. It recognises the work the ICA and its member companies are undertaking to explore potential improvements to disclosure that could help consumers make better informed decisions about their insurance,” Whelan said.
“In July the ICA established its Effective Disclosure Taskforce, which is examining the role of disclosure documents in the context of the broader consumer experience. This includes guidance, sum insured calculators and advice provided by insurers when consumers are purchasing products.
“It’s timely that the Taskforce, chaired by leading insurance lawyer Michael Gill, will soon advise the ICA Board on initiatives that increase the effectiveness of insurance disclosure documents.”
Other recommendations that could affect the general insurance industry were met with mixed reviews from the ICA as the Council backed moves to facilitate innovative disclosure, data sharing and clearly outlining the provision of financial advice.
“The ICA is pleased the government intends to remove regulatory impediments to innovative product disclosure,” Whelan continued.
“The ICA supports the government’s decision to ask the Productivity Commission to review options to improve accessibility to data. This is a complex issue. In some situations, it could greatly benefit consumers, and encourage greater innovation and efficiency in the financial system.
“However, it does also raise issues about the proprietary nature of some information and the need to recognise commercial sensitivities.”
“The ICA has long been concerned about the impact of the definitions of financial advice on insurers’ ability to help customers make informed choices when buying general insurance. The ICA welcomes the Government’s decision to consult with a wide range of stakeholders on renaming general advice after conducting consumer testing.”
Recommendations surrounding efforts to strengthen product issuer and distribution accountability and the introduction of product intervention power were met with more concern.
“The ICA supports the broad policy goals but does not believe such an obligation is necessary for general insurers, nor would it provide practical consumer benefit. The ICA welcomes further consultation on this measure.”
Whelan continued that the introduction of product intervention powers needs further consultation with regards to its effect on the insurance industry.
“The ICA remains concerned about the implementation of this recommendation, given that
ASIC and the general insurance industry already have a cooperative and constructive dialogue in relation to compliance issues.
“The ICA is pleased further consultation will take place and will seek to ensure any intervention measures are restricted to exceptional circumstances and significant breaches of the law.”
