Risk Regulatory Update
/APRA to offer greater transparency in life and general insurance data
The Australian Prudential Regulation Authority (APRA) is to publish broader industry-aggregate data for both the general insurance and life insurance sectors. APRA has announced it has decided to determine class of business and product group data for both industries as non-confidential, after feedback published in February 2020. Transparency was a priority for APRA in collecting the data.
Life insurance code of practice up for public scrutiny
The Financial Services Council (FSC) has released the second draft of the Life Insurance Code of Practice 2.0 for public consultation. The new draft incorporates feedback from the first consultation draft, alongside recommendations from the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the life insurance industry, ASIC reviews, Productivity Commission reports, consumer advocate feedback and the Hayne Royal Commission. The Code is mandatory for all FSC life insurance members and is to be governed by the Life Code Compliance Committee.
Advice industry opposes CSLR
The financial advice industry has baulked at the design of the proposed compensation scheme of last resort (CSLR) after concerns the scheme will become a go-to option rather than a last resort. The proposed scheme exempts some industry participants like product providers, which advisers say is unfair.
Eight of Australia’s biggest financial planning industry associations have come together to fight the design of the scheme which was in draft legislation released for public consultation, saying it makes financial advice less affordable and accessible.
The Royal Commission recommended that there be established a compensation scheme of last resort to compensate consumers when all other avenues had been exhausted, which is supported by all eight associations. What is in contention, however, is that the structure of the proposed scheme includes the Australian Financial Complaints Authority’s (AFCA) outstanding expenses as well as failing to address the causes of unpaid consumer compensation. The fear is the scheme would not be used only as a last resort, which would be a major deviation from the Royal Commission’s intent.
The associations say the scheme will add significant cost and complexity, which is at odds with the commitment to reduce red tape and cut the cost of doing business.
FSC initiates consultation on occupational exclusions in MySuper insurance
The FSC is starting the process of consultation with superannuation and life insurance providers, consumer advocates and other stakeholders to remove occupation-based exclusions in the default life insurance classification in MySuper products.
Your Future, Your Super reforms introduced a new consumer protection to their accounts, whereby members are connected to their fund in an ongoing way, from job to job, rather than setting up new accounts, called stapling. One of the issues identified by the FSC is that in a small number of instances, the MySuper option of a fund has default group life insurance cover that excludes some occupational classifications. If a member had this type of insurance and wasn’t clear on the exclusions, they may find themselves unable to be paid a claim.
