The Australian regulatory financial services sector has certainly been giving props to Greek philosophy of late with its channelling of Heraclitus’ statement that “there is nothing permanent except change.”
Now that the dedicated insurance hearings at the Royal Commission have finished, here is a snapshot of the current legislative and regulatory plans for the insurance industry that are in train and coming over the horizon.
- Product design and distribution obligations & intervention powers – following the recent consultation by Treasury, draft legislation has now been introduced into parliament (link here).
- Unfair contract terms legislation to apply to insurance – Treasury consultation on a proposed model law ended in August (link here).
- Life insurance claims reporting – ASIC and APRA are in the process of creating a formal reporting regime for life insurance claims to drive accountability in the sector (link here).
- Disclosure regime for general insurance – Treasury is currently reviewing and considering reform of the product disclosure regime for general insurance products (link here).
- ASIC oversight of insurance claims handling – work to implement this recommendation from ASIC Report 498 in 2016 was placed on hold by the Royal Commission. The impetus for change in the law has only increased in the meantime and reform must now be very likely.
- Civil penalties for breach of the duty of utmost good faith – the government has agreed to give ASIC the power to impose civil penalties on insurers that breach their duty of utmost good faith, as recommended in ASIC’s Enforcement Review Taskforce Report in December 2017 (link here).
- ASIC approval of industry codes – another Taskforce Report recommendation by ASIC that the government has agreed to, pending the Royal Commission’s final report, is to move the general and life insurance codes of conduct to a co-regulatory model where ASIC approves these codes and enforces breaches.
No doubt the above proposals will receive a tailwind from the publication of the interim Royal Commission report at the end of September and the final report at the beginning of February 2019, that will consider insurance and superannuation.
The obvious questions at this stage are whether the planned reforms that pre-date the Royal Commission will be seen to go far enough, whether additional reforms are likely to feature to add to the list, whether the government can legislate in time before next year’s federal election and what difference a change in government may bring.
It seems likely it will take at least the next six to 12 months for a more complete picture of the legislative and regulatory reform programme to emerge.