Risk Regulatory Update
/Life industry developing new professional standards framework
The life insurance industry is creating a Professional Standards Framework for claims staff and underwriters in conjunction with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF). Life insurers are involved in the process, which is hoped to be in place by 2023 whereby all claims professionals are expected to have a Certificate IV level competency across ethics, sustainability, products and services, and law and regulation. Underwriting professionals are expected to have completed this by 2024.
The purpose of this update in skills and education is to set a minimum standard for professionals working in the insurance space. The new framework will sit with commitments made in the Life Insurance Code of Practice.
Government combining advice reviews
The 2022 Life Insurance Framework (LIF) Review is being merged into the Quality of Advice Review, with the federal government taking over the latter task from the Australian Securities and Investments Commission (ASIC). The LIF review is now part of the Quality of Advice Review to reduce duplicate work.
The review was recommended by the Hayne Royal Commission in 2019, to be completed by 30 June 2022, but no later than 31 December 2022.
IOOF licensees remediating clients for Bridges and RI Advice deficiencies
After ASIC surveillance in late 2020, some client files from Bridges Financial Services (15 per cent) and RI Advice Group (17 per cent) were found to contain indications of possible client detriment. IOOF has agreed to an action plan for both licensees.
AFA wants self-reporting of breaches deferred
The Association of Financial Advisers is recommending that proposed self-reported breaches should be deferred, as smaller advisory firms would be unable to comply. The recommendation came in the Hayne Royal Commission to help protect consumers, whereby Australian financial services licensees were required to follow breach-reporting regulations when advisers were found to have engaged in misconduct. The recommendation was that significant breaches and investigations must be reported within 30 days, with the punishment for non-compliance being criminal penalties. It was also recommended that ASIC publish breach report data every year not just by breach type, but by an individual licensee.
The AFA says the law will cause a large increase in the breaches required to be reported when many of the breaches are administrative in nature. An example used was an AFA licensee partner with four reported breaches in 2020 requiring 198 reports under the new regime.
Further concerns were raised about the criminal penalties for record-keeping breaches, which again are largely administrative in nature.
ASIC extends relief for RoAs
ASIC has extended the relief measure allowing financial planners to provide clients with a Record of Advice (RoA) instead of a Statement of Advice (SoA) until October 15. The relief was introduced in April 2020, so RoAs can be provided for clients whose situations have changed due to the pandemic, and if a client sees a different adviser from the same practice or licensee than their usual regarding existing financial products previously advised upon.
Two other measures introduced at the same time have not been extended. Relief to facilitate advice regarding the federal government’s early access to superannuation scheme has ended, as the scheme was wound up on 31 December 2020. Advisers were not required to provide an SoA when advising on the scheme. Additionally, the relief to extend the time for providing time-critical SoAs has also ended, with advisers able to provide advice up to 30 business days instead of five business days to provide a client with an SoA.
