Read more: Is the Australian insurance industry ready for October 05?

“Perhaps the surprise was how instructive some of these reforms were. For example, product design and delivery obligations insurers and distributors must have a documented ‘product governance system’ that details how the business will meet and manage its product design and delivery obligations, ”Blackmore said.

He said these highly directive new rules meant most insurers would only have to adopt a specific policy on the subject for their Australian operations.

Another change under the new rules is to force insurance product sellers to specify a ‘target market’. The concept is not entirely new, Blackmore said.

“Insurance regulators in the UK and Europe have increased their focus on ‘conduct risk’ – which over the past few years has addressed the risks of insurance companies that act in ways that are harmful to their customers.”

He said that even if only from a marketing perspective, the insurance industry always considers identifying a ‘target market’ when an insurance product is designed as a good practice.

“But the design process for a consumer insurance product that is mandatory to identify the target market and build from there is certainly new.”

Blackmore said product design and delivery obligations insurers must design their consumer insurance products to meet clearly identified target market demand, distribute their consumer insurance products in a way that only points the product to that target market and regularly review product design and delivery effectiveness. .

He added that insurers need to have a documented ‘product governance system’ to determine the design and distribution of products and to determine the ‘target market’ for each consumer insurance product given to them.

There are also rules for delayed sales models that aim to protect consumers in situations where they may be under pressure to buy a product that they may not fully understand in a short notice. Blackmore gave the example of buying a mobile phone and consumers probably don’t think about any device protection insurance unless the seller is going to buy the phone.

“Sometimes the law prescribes a cooling off period. The law mandates a four-day ‘moratorium’ to allow consumers to think about add-on insurance products, consider their benefits and prices, view online reviews and possibly research options.

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There is also a new hawking ban law.

“The purpose of amending the Hawking ban is to prevent consumer insurance products from selling under pressure, discouraging sales strategies that can make consumer informed decisions and protect consumers,” Blackmore said.

Hawking provisions, he said, are based on a single general prohibition that states that a person should not issue, sell, request or invite a consumer to purchase financial goods through unintentional communication.

“‘Unsolicited communication’ means a telephone call, face-to-face meeting, or any other real-time interaction of the nature of a discussion or conversation for which the consumer did not consent. ‘Consent’ is a positive, voluntary and A clear request is required and is valid for six weeks after the start of communication. “

Blackmore said consumers can specify how they can be contacted and can withdraw or change their consent at any time.

There is a new ‘responsibility to take reasonable care not to misrepresent’ which could significantly change the way an insurer communicates with a customer.

“The new tariff may not change the consumer insurance policy; But it could change the application process a bit. Until now, it was the duty of persons applying for consumer insurance products to provide the insurer with any information that the insurer knows, or should know, relevant to the insurer’s decision as to what terms the risk should be insured. “

Blackmore said it was a significant obligation on the insurer and in some cases was reasonably unfair. The obligation is to effectively let the consumer know which information will be relevant to the insurer’s decision to insure the risk, he said.

“There is a plausible argument that insurers are better placed to understand these risks than insurers, and therefore any questions need to be asked in order to get relevant information from insurers for this reform.”

Blackmore said the potential impact of the reform would be to increase the number of questions an insurer must answer when applying for a consumer insurance product, as the insurer has to cover every possible question that affects whether or not it insures risk and under what conditions.

“Of course, insurers also know that a lengthy application form is a barrier for new customers, so it will be interesting to see how they maintain this balance,” he said.


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