He was less black-and-white about commissions on general insurance products, saying ASIC should “review the exemptions for general insurance products and consumer credit insurance products” in its 2022 review.
This will come as a relief to the insurance broking industry, which had feared a total ban on commissions would decimate their commercial broking business. However ASIC has already signalled it would support a total ban on general insurance commissions.
Under Commissioner Hayne’s proposals, claims handling by insurers would be classed as a “financial service” under the Corporations Act, requiring insurers to handle claims “efficiently, honestly and fairly”. The current exemption for claims handling limits the extent to which ASIC can intervene, meaning the changes would ramp up the regulation of the sector.
“There can be no basis in principle or in practice to say that obliging an insurer to handle claims efficiently, honestly and fairly is to impose on the individual insurer, or the industry more generally, a burden it should not bear,” the Commissioner said.
He recommended insurance cold calling, or “hawking”, be banned outright, and proposed ASIC put a cap on the commissions paid to car dealers when they sell add-on insurance. He also called for add-on insurance to be sold on a deferred sales model.
Funeral insurance would be reclassified as a financial service under the Commissioner’s recommendation, bringing it under ASIC’s regulatory regime.
The report recommended the industry-written codes of practice in both life and general insurance be made legally enforceable.
The Banking Executive Accountability Regime (BEAR), which holds bank executives to a high degree of regulatory scrutiny, would be extended to the executives of life and general insurance companies. Insurers would also be considerably more accountable to the new Australian Financial Complaints Authority.
Commissioner Hayne also called for more oversight of the group life insurance market, including demanding vertically integrated companies that have both super funds and life insurers justify decisions to default members into their own life policies.
Customers would be better protected against charges they had misled insurers about their personal circumstances by an amendment to the Insurance Contract Act replacing “duty of disclosure” with a less onerous “duty to take reasonable care not to make a misrepresentation to an insurer”.