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THE REVISED REFORM TIMETABLE FOR GENERAL INSURANCE.

THE REVISED REFORM TIMETABLE FOR GENERAL INSURANCE.

Regulators have shifted their priorities to deal with the COVID-19 pandemic. This means significant reforms and legislative change to general insurance may be delayed. We outline what’s changed and when you need to be ready for reform.

Licence applications are delayed

APRA will not issue any new insurance or banking licences for at least 6 months. We also expect there will be a delay to the application process for Australian financial services licences because ASIC has a reduced workforce operating remotely.

New legislation and policy work

Consultation papers for ASIC regulatory guides relating to key Royal Commission reforms are likely to be delayed until at least October 2020. Many of these changes were originally to start on 1 July 2020. These will be delayed by at least six months.1

ASIC has changed its priorities

Before COVID-19, ASIC was moving forward on a range of policy and legislative reforms that arose out of the Royal Commission.

ASIC will now prioritise regulatory efforts where:

  • There is the risk of significant consumer harm;
  • There are serious breaches of the law;
  • There are risks to market integrity; or
  • The matter is time critical.

This means you have more time to plan for key regulatory reforms. We’ve identified which changes apply now and which ones are likely to be delayed. We’ll update this blog as more information comes to hand.

Initiatives already law

Initiative What When More detail
Design and distribution obligations
  • Target market determinations required for retail client products that have a PDS
  • Extensive distribution, record-keeping and reporting requirements
  • Changes were originally to apply from 5 April 2021 but is now delayed to start on 5 October 2021
  • Consultation for Consultation Paper 325 Design and Distribution Obligations   (CP 325) ended on 11 March 2020
  • Final regulatory guide will be published by December 2020
  • ASIC’s product intervention powers
  • Gives ASIC product intervention powers (PIP)
  • No PIP orders or instruments relevant to general, life and other risk products have been issued yet
  • Commenced on 6 April 2019
  • No delay announced
  • Consultation for Consultation Paper 313 Product Intervention Power (CP 313) ended on 7 August 2019
  • Final regulatory guide may not be published until after September 2020
  • This may be brought forward if ASIC believes there is a risk of significant consumer harm if it’s delayed
  • More information on selling insurance through car yard intermediaries below
  • Unfair contracts protections for insurance policies
  • Applies the unfair contract terms regime to insurance contracts sold to retail clients
  • Changes apply to any insurance contract entered into or renewed after 5 April 2021
  • No delay announced
  •  
    Initiatives that will be delayed by 6 months or more
    Initiatives What When
    ASIC directions power
  • Gives ASIC additional powers to direct a licensee to act in a certain way where they believe the licensee may or will contravene a financial services law
  • Consultation period for the draft bill closed on 28 February 2020
  • Legislation expected to pass by December 2020
  • Enforceable industry codes
  • Allows ASIC to designate enforceable code provisions in financial services industry codes
  • Some codes will become mandatory
  • Breaching provisions may attract civil penalties
  • Consultation period for draft legislation ended on 28 February 2020
  • Legislation expected to pass by December 2020
  • No hawking of insurance products
  • Bans hawking CCI, life insurance and all other general insurance products to retail customers
  • Consultation for draft exposure bill ended on 28 February 2020
  • Legislation is expected to pass by December 2020 and commence 1 January 2021
  • Making insurance claims handling a financial service
  • The definition of a ‘financial service’ under the Corporations Act to be extended to include the handling and settlement of insurance claims or potential insurance claims
  • Businesses who want to transition need to apply for a claims handling authorisation or become an authorised representative
  • Consultation period for draft legislation ended on 10 January 2020
  • Legislation is expected to pass by December 2020
  • Transition period will commence on 1 January 2021 with a deadline of 30 June 2021 for businesses wanting to transition
  • ASIC guidance likely to be delayed until October 2020
  • Cap on vehicle dealer commissions
  • Gives ASIC the power to cap the amount of commissions that may be paid to vehicle dealers for the sale of add-on insurance products
  • Consultation period for draft legislation ended on 28 February 2020
  • Will be enacted by December 2020 with a likely start date of 1 January 2021
  • Duty to take reasonable care not to misrepresent the insurer
  • Changes the duty of disclosure for consumers by requiring them to take reasonable care not to make a misrepresentation to an insurer
  • Consultation on draft legislation ended on 28 February 2020
  • Legislation is expected to pass by December 2020
  • Deferred sales model for add-on insurance and risk products
  • Introduces an industry-wide 4-day deferral period for the sale of all add-on insurance products (excluding comprehensive motor insurance)
  • Consultation for Consultation Paper 324: Product Intervention: The sale of add-on financial products through caryard intermediaries (CP 324) ended on 12 November 2019
  • Product intervention orders for this sector unlikely to be finalised until after September 2021
  • Legislation is expected to pass by December 2020 and likely start date of December 2021
  • We know many businesses have increased capacity at the moment. This gives you time to tackle some of these changes head on so you’re prepared when ASIC and Parliament progress them. If you’d like help planning for these changes, get in touch. We’d be happy to help.

    Charmian Holmes and Lydia Carstensen

    May 2020

    See Treasury’s media release: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/update-implementation-banking-superannuation-and; and also see ASIC’s media release “20-109MR ASIC defers commencement of mortgage broker reforms and design and distribution obligations” dated 8 May 2020.

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