The Federal Government has rejected key Quality of Advice Review (QAR) proposals to expand the definition of personal advice and create a good advice duty obligation, but is proceeding with other reforms that will have implications for general insurance. 

General insurers will be permitted to give “advice on simple matters” but they will not be allowed to charge fees or commissions for providing the guidance, the Government said today in its response to outstanding QAR proposals. 

A new class of financial adviser will be created, as recommended in the QAR final report, but the Government plans to introduce additional guardrails to ensure there are “robust consumer protections” in place, Treasury said. 

Financial Services Minister Stephen Jones, who will speak in Parliament today about the advice reforms, says the Government aims to “expand the supply of advice under a new model that will deliver simple advice at scale that will be high quality, helpful, and safe for consumers”. 

“Under this model, there will be a new class of financial advisers who will fill the advice gap. This class will be required to meet education standards, be focused on providing advice on simple matters, and be prevented from charging a fee or a commission. 

“These changes will apply across all financial institutions, including superannuation funds, life and general insurers, and banks. 

“It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions. The licensee will be wholly responsible for the advice provided.” 

Industry stakeholders are still examining today’s announcement and its likely impact on general insurers and general insurance brokers. 

The National Insurance Brokers Association has not yet responded to Mr Jones’s announcement on the final tranche of QAR recommendations. 

The Insurance Council of Australia (ICA) says it welcomes the decision to "allow insurers to provide more personalised financial advice".

"A common complaint of insurance customers is that their insurer is not able to provide advice based on their own circumstances," ICA said.

"This means that, other than when using a broker, when purchasing insurance customers have to make their own assessments about the suitability of a product without the help of professional advice. 

"The changes announced today – in particular the modernised best interests duty – will allow insurance customers to benefit from clearer conversations with their insurer, leading to better financial outcomes." 

Radford Lawyers Principal Solicitor Mark Radford, who advises clients in the insurance industry, says for general insurance “it’s a positive” that the existing personal advice definition will stay as is. 

“Depending on how it was drafted, it might have unintentionally, or it might have forced people, to give advice where they didn’t want to. That was the risk, so it’s a positive conceptually,” he told insuranceNEWS.com.au. 

“The positive of not broadening the personal advice definition is that it removes the risk that people not wanting to give personal advice could have been forced to give personal advice for general insurance.” 

On the plan to allow general insurers to provide simple advice, Mr Radford says “if it is conceptually making it easier for them…that’s a threat for brokers”. 

“Anything that allows insurers to provide advice beyond general advice would be a potential threat, depending on the details.” 

Click here for the Government response.