In a submission filed with the Productivity Commission, Australia's peak insurance body has called for more flexibility to enable general insurers to provide tailored information to consumers without triggering the personal advice rules.
The Insurance Council of Australia (ICA) said the existing regulatory regime around personal advice is not only “expensive and time-consuming,” it is also better suited to investment products, “but seems overly cumbersome for general insurance.”
ICA also said that as a result of the current regulatory regime, a majority of general insurance sold was on a 'no advice' business model, or where advice was so carefully worded that it fell within the less onerous definition of “general advice,” Money Management reported.
“The difference between information that is personal advice, general advice, and factual information can be minute; a single word in some circumstances,” the submission said. “Compliance with the financial advice regime therefore inevitably focuses training for employees and agents on phrasing information so as to allow them to remain within the definition of the advice model they are operating under, rather than on delivering information that is of the most assistance to the consumer’s inquiry. This can produce counter-intuitive conversations driven by compliance needs rather than consumer needs.”
ICA wrote in the submission that insurers struggled to answer questions where consumers were seeking to validate a decision, and that it is when an insurer started to prioritise the types of information to provide clients that it triggers the question whether advice was being provided, Money Management reported.
“The industry is not commonly called upon to provide complex advice,” it wrote. “However, the fear of triggering the legal definition of personal advice hinders insurers from being more forthcoming in the guidance they provide. This results in a detrimental outcome for both industry and consumers.”