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Add-on sales guidance released as start date looms

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The Australian Securities and Investments Commission (ASIC) has released its regulatory guide and customer information requirements for the new add-on insurance deferred sales model.

The guide, which follows the release of proposed product exemption regulations, aims to provide more clarity around how the laws will work when they start on October 5.

ASIC Deputy Chairman Karen Chester says feedback from the industry and consumer representatives has been “invaluable”, enhancing the guidance and information requirements.

“This is a key Government reform aimed squarely at improving consumer outcomes in the add-on insurance market,” she said.

“The pause in the sales process will give people time to consider the insurance they’ve been offered, and compare it with alternatives. It will reduce the risk of people buying insurance on the spot that is poor value or just not right for them.”

Clarifications in the guide include that lenders’ mortgage insurance is not an add-on product and that default inclusion of liability and personal accident insurance with a local sporting club membership would not typically fall under the model.

Generally, life insurance will not be an add-on product, as it doesn’t manage a financial risk relating to the principal product or service, but instead insures the life of the customer, although it depends on the design.

A mobile phone protection plan that includes insurance components, as well as extended warranty components which are not insurance, will be a contract of insurance for the purposes of the legislation.

Whether offers or sales of insurance by brokers are covered by the deferred sales model will depend on the circumstances and whether the product satisfies the add-on insurance product definition.

The guide also sets out rules for written and verbal sales offers across the pre-deferral, deferral and post-deferral periods and outlines the interaction with new hawking prohibition.

Consultation on the previously released deferred sales model exemption regulations remains open until the end of next week.

The National Insurance Brokers Association (NIBA) says it is preparing a submission and will provide further information to members when the proposed regulations are finalised and the detailed definitions of each exemption are agreed.