The Australia Securities & Investments Commission (ASIC) has announced that it will phase in six reforms in the financial services sector in October.
In a statement, the regulator said the reforms are a result of recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (also known as the Hayne Royal Commission) and other inquiries.
The new laws include design and distribution obligations, restrictions on the unsolicited selling of financial products (hawking), a deferred sales model for add-on insurance products, reference checking and information sharing requirements for financial advisers and brokers, and new requirements around how breaches are reported to ASIC and disputes are managed internally in firms.
“These changes will support fairer outcomes for consumers and a stronger financial system for all Australians,” said Joe Longo, chair of ASIC. “While these reforms have been in the pipeline for some time, ASIC recognises they require significant changes to businesses’ systems and processes and take effect at the same time industry is facing other challenges, including from COVID-19 and renewed lockdowns. We therefore recognise there will be a period of transition as industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply.”
Of note for the insurance sector, 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 model was introduced to address numerous issues in the add-on insurance market, including poor-value products, unfair sales practices and outcomes, and negative claims outcomes compared to other insurance markets.