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Insurance products in advocatesí firing line

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A joint submission to the Australian Securities and Investments Commission (ASIC) has included a range of insurance products the corporate regulator could target with its new product intervention powers (PIP).

The submission from the Financial Rights Legal Centre, Consumer Action Law Centre, Financial Counselling Australia, Consumer Credit Legal Service, Australian Shareholders Association, Consumer Credit Law Centre SA, Choice, and Consumers’ Federation of Australia features a “product hit list” that includes funeral insurance and expense-only policies, accidental death and injury insurance, and pet insurance.

“They are prime candidates for ASIC to examine further and consider using the PIP to prevent further consumer harm,” the groups’ submission says.

It says pet insurance is often expensive, confusing and poor value. Choice was unable to recommend a single policy due to highly restrictive terms and a lack of competition in the market, the submission says.

Accidental death insurance is a particularly low value product, and it can contain clauses which further limit the likelihood of a successful claim, it says.

The submission also advocates an “act now, ask questions later” approach. ASIC shouldn’t be required to make extensive consultations before an intervention as it would hinder ASIC’s ability to respond to risks in a timely fashion, it says.

“If the requirements to propose and implement a production intervention order are too onerous or pose a risk for ASIC, then there is a high chance the PIP will be used rarely and only when egregious harm has already occurred. This simply cannot happen.”

The intervention period would give time for a company to change its product or evade the order, the groups say.

They also say ASIC also should not provide options to address the harm in its consultations, and companies should be named and shamed in an intervention order “where practicable”.

Determining whether there has been significant consumer detriment should be applied as broadly as possible, it says, looking at harm to consumers and considering non-financial loss.