ASIC today released a new regulatory guide and final customer information requirements as part of its work to implement the new deferred sales model for add-on insurance (RG 275).
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 deferred sales model was introduced by Parliament in December 2020, following a recommendation of the Financial Services Royal Commission (Royal Commission). The Royal Commission found numerous issues in the add-on insurance market, including poor-value products, unfair sales practices and outcomes, and worse claims outcomes than in other insurance markets.
RG 275 provides guidance to industry as they prepare to comply with the deferred sales model from 5 October 2021. It follows consultation on the draft proposals with stakeholders (see CP 339 Implementing the Royal Commission recommendations: The deferred sales model for add-on insurance).
As required by the reforms, ASIC has made an instrument specifying the information that must be given to a customer to start the four-day deferral period, and how that information must be given.
Deputy Chair Karen Chester said, ‘This is a key Government reform aimed squarely at improving consumer outcomes in the add-on insurance market. The pause in the sales process will give people time to consider the insurance they’ve been offered, and compare it with alternatives. It will reduce the risk of people buying insurance on the spot that is poor value or just not right for them.’
‘ASIC’s work will help businesses prepare for the new sales model. The input we’ve received from industry and consumer representatives has been invaluable. It has enhanced our regulatory guidance and the customer information requirements.’
‘The deferred sales model is part of a suite of Government reforms in the insurance sector that will improve how insurance products are designed and sold, and how claims are managed.’
ASIC will continue to engage with industry in the lead up to the new laws commencing.
Moneysmart has information for consumers about add-on insurance including what the deferred sales model means for them.