ASIC flags significant reforms to impact insurance industry
ASIC Commissioner Peter Kell talks exclusively to Insurance Business TV journalist Donna Sawyer about impending law reforms affecting insurance brokers and the regulator's proposed review of training standards.
Video transcript below:
Interviewer: ASIC Commissioner, Peter Kell, thanks for joining me. Tell me what is unique about regulating insurance brokers as opposed to other industries?
Peter Kell: Well I guess insurance brokers are unique in that they can have quite specialist knowledge or a specialist expertise in areas of general insurance or life insurance, but it’s important to remember that we approach the regulation for the insurance brokers in the same way as many other intermediaries. They still have to have their compliance systems in place, they still have to get their disclosure right for their clients, they still have to supervise their representatives in a competent fashion. So many aspects are still the same as the way that we approach other parts of the finance sector.
Interviewer: ASIC has previously had to warn insurance brokers about the use of the term independent when describing their business. Can you tell me have insurance brokers heeded that requirement now?
Peter Kell: We don’t get many cases these days of insurance brokers who are misusing the term independent. It does come up, where it does we certainly get in touch and make sure that it’s fixed. One of the common misconceptions is that independence relates purely to ownership ties. Actually under the Corporations law, it’s more about the method of remuneration, are you receiving commissions, are there potentially conflicts of interest. If that’s the case then you can’t call yourself independent. So often it’s a result of a confusion around how the term is used in the law, but generally we find the industry understands that these days.
Interviewer: We continue to see a regular flow of insurance brokers banned by ASIC. Can you tell me why the industry is so susceptible to cases of illegal activity?
Peter Kell: Well we are continuing to crack down on any incidences of fraud that we observe and we find that we get a higher degree of co-operation from the industry itself around this and it’s pleasing to see that NIBA, the industry association supports this work by ASIC. We are also working more generally with the industry around issues such as risk management frameworks and their compliance systems to make sure that we can minimise the risk of any of these sorts of problems emerging in the future.
Interviewer: Are there any changes in the pipeline that will specifically affect insurance brokers?
Peter Kell: There are quite significant changes coming through by way of law reform at the moment, so if brokers are providing personal advice, if they are in that area then the FOFA reforms will obviously have an impact. We have got a lot of guidance out there in the industry around that at the moment. We are also looking at a review about training standards and that may well have an impact on some of the issues that brokers focus on. That will be one of the areas that we consult on this year.
Interviewer: ASIC Commissioner, Peter Kell thanks for joining me.