Reporting requirements should be reviewed to remove duplication and regulations should be proportionate to risk, the Insurance Council of Australia has told the Council of Financial Regulators. 

The deferred sales model requiring a four-day pause between a consumer buying a product and the sale of add-on insurance is leaving people unprotected, ICA adds in a submission to the council on streamlining regulation. 

Although the model was designed to prevent pressure selling, ICA says it assumes all consumers are unable to make informed decisions about cover they need. If they want extra cover, they cannot buy it within four days if the insurer has a distribution arrangement with the product seller, and they cannot approach the insurer directly. 

ICA cites the example of a consumer being unable to buy home and contents cover required for a home loan. 

The submission says the parliamentary inquiry into responses to the 2022 floods recommended insurers provide more guidance to consumers on sums insured and cash settlements, yet financial advice limitations restrict insurers from doing so. 

It says the government should consider a principles-based advice framework like one suggested by the Actuaries Institute, with tiers of risk-based communication: help, guidance and advice. 

The tiers would range from suggestions based on general circumstances to advice based on detailed analysis of personal circumstances. 

“Using this distinction, insurers could provide guidance or fact-based information about their products, such as cash settlement and sum insured considerations, without it being considered advice.” 

The submission also suggests ways to streamline compliance with design and distribution obligations, particularly for simple mass market general insurance products. 

And ICA argues for a less prescriptive approach under anti-hawking regulations, saying the move to prevent harmful, unsolicited selling stops staff from pointing out underinsurance when contacted by customers. 

The submission is available here.