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In this wide-ranging speech APRA member Ian McLaughlin explains APRA’s current’s Life and General Insurance Capital Review leading up to the new capital framework which will be effective from 1 January 2013 as well as risk management and governance issues relevant to customers.
He also details APRA’s concerns about the group life market and general insurance industry issues.
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ASIC has refused relief from the requirement to obtain express consent before delivering financial services disclosures online.
ASIC refused relief to a general insurance provider from the requirement to obtain express agreement to providing a statement about its driver protection cover (DPC) on its website from renewing compulsory third party insurance customers under s1015C(1)(a)(iii) of the Corporations Act, as inserted by Class Order [CO 10/1219] Facilitating online delivery of PDSs, FSGs and SOAs.
In its latest report ASIC explains that relief was refused because:
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ASIC has announced that in a recent surveillance project, it found 21 instances of insurance brokers and financial planners making statements about the independence of the licensee or the services they provide in breach of the Corporations Act. The relevant financial services licensees have now voluntarily complied with ASIC’s request to remove or amend the statement in each of the 21 instances.
AFS licensees are prohibited from using the terms, ‘independent’, ‘unbiased’ or ‘impartial’ if they receive commission or volume-based payments.
The licensees identified included 17 general insurance brokers, 3 financial planners and 1 life broker. In one instance, the statement was found on the website of an authorised representative.
AFS licensees must ensure that statements made by representatives in any published material comply with the relevant provisions of the Corporations Act.
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In A and Financial Institution [2012] AICmrCN 1 the Privacy Commissioner dealt with a complaint from a customer of a financial institution that a mobile phone number provided for security purposes in an internet banking application was used 5 years later by a company marketing insurance products for the financial institution.
The financial institution did not deny the complainant’s claims that the complainant had provided their mobile phone number for security identification purposes. The Commissioner considered the context of the collection of the mobile phone number, and took the view that the primary purpose of collection was to provide extra security protection for banking transactions. The Commissioner took the view that disclosing the mobile phone number for the secondary purpose of enabling the direct marketing company to contact the complainant was not related to the primary purpose of collection.
The financial institution advised the Commissioner that it sent the complainant a letter about its insurance products a week before the complainant received the telephone calls. A notice in fine print at the back of the letter stated that the financial institution would send the complainant’s mobile phone number to the financial institution’s contract company, to call the complainant, unless the complainant contacted a specified number to advise they wanted to be excluded from the calling program.
The financial institution considered that, because the complainant had not responded to the letter by calling to advise it did not want to participate in the calling program, it was entitled to assume that its disclosure of the complainant’s personal information, including the mobile phone number, was within the complainant’s reasonable expectations.
The parties conciliated the matter. To resolve the matter the complainant accepted a letter of apology and assurances from the financial institution that the complainant would not be included in any future marketing campaigns. The financial institution also undertook to conduct a review of its marketing campaign procedures.
The Commissioner accepted that the complainant was unlikely to have closely read the correspondence as the letter sent by the financial institution was about a service that the complainant was not interested in receiving from that organisation.
Further, the Commissioner noted that the information aimed at advising the recipient of the intention to disclose the mobile number for direct marketing purposes was included as part of additional information located on the back of the correspondence. This information entitled ‘Important Information’, was not only on the back of the correspondence but was also in extremely small font which could seem contrary to it being important information.
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ASIC has announced that Elders Insurance has repaid 9,307 customers approximately $5.3 million as part of a program to rectify underpayments on motor vehicle insurance claims for a period before September 2010.
In September 2010, Elders advised ASIC that it had inadvertently underpaid customers when paying total loss claims for market value insured motor vehicles by not including the cost of stamp duty on the purchase of a replacement vehicle of the same value where the insured vehicle was a total loss. Elders was alerted to the underpayments through resolution of a matter by the Financial Ombudsman Service in August 2010.
Up until September 2010, Elders’ motor vehicle insurance policy covered the cost of stamp duty on the purchase of a replacement vehicle of the same value where the insured vehicle was a total loss. Stamp duty varies from state to state but on average is about 3% of the purchase price.
In consultation with ASIC, Elders implemented a review and a rectification program to pay the outstanding amounts, including interest, to eligible customers.
Elders is still working to contact around 350 former customers for whom they have no current contact details.
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The Insurance Contracts Amendment Bill 2012 has been passed by both Houses.
UPDATE: Act assented to on 15 April 2012
Insurance providers will be required to use a standard definition of the term flood (and all related terms) in all Home Building and Home Contents (combined and individual) (HBHC), small business and strata title insurance policies and their supporting documents. The term “flood” will be defined in regulations.
It is expected to be consistent with the wording proposed in the Government’s Consultation paper, “Reforming Flood Insurance: Clearing the Waters”. The proposed wording is:
Flood means the covering of normally dry land by water that has escaped or been released from the normal confines of:
– any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
– any reservoir, canal, or dam.
The regulations will commence two years after the day the regulations are made.
The Bill will also implement a requirement for an insurance provider to provide consumers with a Key Facts Sheet (KFS) for Home Building and Home Contents (combined and individual) (HBHC) insurance contracts in accordance with the regulations.
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The Insurance Contracts Amendments Bill 2012 (the Bill) has been passed by both Houses of Parliament.
The Bill introduces a legislative framework to establish regulations for:
The details of these measures, including the final wording of the standard definition of “flood” and the specific content of the Key Facts Sheet, will be made in regulations contained in the Insurance Contracts Regulations 1985. The draft Regulations for the standard definition of flood were released for public consultation late last year and will be finalised shortly.
A discussion paper seeking public comment on the content, format, structure and provision of the Key Facts Sheet was released earlier this year and the closing date for submissions is 23 March 2012. Prototypes of the Key Facts Sheet will be consumer-tested before the final content, format and structure of the Key Facts Sheet is settled.
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Treasury has released a discussion paper on a proposal for a Key Facts Sheet: Home Building and Home Contents Insurance Policies.
The Discussion Paper seeks public comment on the content, format, structure and provision of the Key Facts Sheet that will become mandatory for all home building and home contents insurance policies (combined and individual).
The deadline for submissions is 23 March 2012.
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ASIC has released RG 234 Advertising financial products and advice services: Good practice guidance (RG 234) setting out its views on the obligations of financial service providers to not make false or misleading statements or engage in misleading or deceptive conduct under the Corporations Act and the ASIC Act.
Who it applies to
ASIC’s guidance applies to:
• promoters of financial products and financial advice services. The promoter will sometimes be the product issuer, but can also be a third party such as a financial adviser, distributor or agent; and
• publishers of promotions about financial products and financial advice services.
Promoters who hold an AFS licence must comply with the ASIC Act to meet their obligation to comply with financial services laws: s912A(1)(c).
What products it applies to
ASIC’s guidance applies to all types of financial products, including:
• investment products;
• risk products;
• non-cash payment facilities; and
• credit facilities.
Although references to ‘financial products’ in this guide mean financial products as defined in the Australian Securities and Investments Commission Act 2001 (ASIC Act) and therefore include credit facilities (see s12BAA, ASIC Act) the guide focuses primarily on advertising of investment and risk products and financial advice services. Different considerations apply for advertising of credit products and services, and ASIC plans to issue additional guidance for credit providers and credit service providers under the National Consumer Credit Protection Act 2009 (National Credit Act).
The good practice guidance also applies to advertising of both general and personal financial product advice. References to ‘financial advice services’ in the guide mean the provision of financial product advice as defined in the ASIC Act: see s12BAB(5).
What the guidance covers
The guidance covers:
• the nature of the product;
• returns, benefits and risks;
• warnings, disclaimers, qualifications and fine print;
• fees and costs;
• comparisons;
• past performance and forecasts;
• use of certain terms and phrases (e.g. ‘free’, ‘secure’ and ‘guaranteed’);
• the advertisement’s target audience;
• consistency with disclosure documents;
• photographs, diagrams, images and examples; and
• the nature and scope of advice.
What media it applies to
It applies to advertising communicated through any medium in any form, including:
(a) magazines and newspapers;
(b) radio and television;
(c) outdoor advertising, including billboards, signs at public venues, and transit advertising;
(d) the internet, including webpages, banner advertisements, video streaming (e.g. YouTube), and social networking and microblogging (e.g. Twitter);
(e) social media and internet discussion sites;
(f) product brochures and promotional fact sheets;
(g) direct mail (e.g. by post, facsimile or email);
(h) telemarketing activities and audio messages for telephone callers on hold; and
(i) presentations to groups of people, seminars and advertorials.
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The Office of the Australian Information Commissioner published 13 privacy case notes on 22 December 2011.
The cases include successful complaints against a registered club, an insurer, a credit reporting agency, a financial institution and a retailer.
(more…)
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