Risk Regulatory Update
/Actuaries Institute releases recommendations for IDII sector
The Actuaries Institute has made its final recommendations after a year-long review with a dedicated task force, to help solve some deeply embedded problems with the individual disability income insurance (IDII) industry. The industry is ‘at risk of failing’, with insurers losing over $2 billion over the past three years on faulty IDII products.
The recommendations include:
Introducing simpler, cheaper product alternatives
Avoid overly long-term guarantee periods for terms and conditions and use the provided Sustainability Guide when developing products, practices, pricing, etc.
Life insurers should engage better with GPs during claims management and use assessments from other practitioners such as occupational therapists etc.
Amend financial advice component of the product rating process, with research houses and licensees working together to ensure that features are rated proportionally to value provided to the consumer in claims payments
APRA intervention powers are supported, due to come into play by 1 October 2022
ASIC acting against Equiti on conflicted remuneration allegations
The Australian Securities and Investments Commission (ASIC) has taken action against financial services group Equiti for allegedly paying conflicted remuneration to financial advisers of $165,000 for inappropriate self-managed superannuation fund (SMSF) advice and property advice.
It is alleged by ASIC that Equiti Financial Services, now named DOD Bookkeeping (in liquidation), paid three Equiti advisers bonuses for property purchases made via client SMSFs. The bonuses applied to purchases set up by Equiti Property, also a subsidiary of Equiti Financial Services’ parent company, Equiti Group. The group also owns a mortgage broking business, Equiti Finance. ASIC is alleging that the bonus payments influenced the choice of product by the adviser.
Equiti Financial Services advisers are also claimed by ASIC to have given financial advice that was not in the best interests of the client in 12 instances between 2015 and 2018. Advice ranged from recommendations to set up an SMSF, rollover existing superannuation into the SMSF, and buy property using the SMSF.
‘FinTok’: advice provided by social media platform influencers unregulated
The Finance Services MInister, Jane Hume, made a statement regarding social media influencers in Australia, saying the government has no plans to step in and regulate social media influences. Providing financial advice without a licence is illegal in Australia.
There is some concern regarding the absolute reach of a social media influencer, who makes money from their role as an influencer and thus has an agenda when offering opinions or advice. A lot of advice is going unchecked across TikTok, YouTube, Facebook, Reddit and other platforms, but determining where the person offering the advice lives, and thus what jurisdiction they are under, is a time-consuming and challenging task.
Westpac settles risk class action
Westpac has agreed to settle a class action filed by Shine Lawyers in regards to mis-selling of costly life insurance products by its financial advisers. The settlement relates to premiums paid for certain insurance policies taken out with Westpac Life Insurance Services Limited between 201 and 2017. The settlement was capped at $30 million and Federal Court approval is still required. Customers were sold life insurance by Westpac, BankSA, St George Bank, Bank of Melbourne and BT Advice.
Over 100,000 customers were potentially overcharged between 4.5 per cent and 10 per cent in annual premiums after customers were sold expensive branded solutions. Customers may get between $1000 and $10,000 compensation each. Westpac has not admitted liability.
