ASIC writes to insurance bodies on TMD review

20 July 2023
| By Rhea Nath |
image
image
expand image

ASIC has reached out to the Insurance Council of Australia, Council of Australian Life Insurers (CALI), and Financial Services Council (FSC) about its review of over 100 target market determinations (TMDs) for general and life insurance products.

Described as a “targeted, risk-based exercise”, it considered a sample of general and life insurance products considered by ASIC to be higher risk and/or potentially provide low value to consumers.

This week, it issued its first stop order for life insurance products against ClearView Life Assurance for DDO failures.

In its TMD review of over 100 products, ASIC found some “good practices” such as a clear definition of a ‘negative target market’, i.e. the class of consumers for whom the product would not be suitable and product eligibility requirements.

However, others provided less detail, using broad statements to describe the target market or failing to include details of the consumers’ financial situation in their ability to pay premiums and other costs.

The review flagged numerous instances of broad statements that failed to specify details, such as some TMDs on distribution and on review triggers.

ASIC found the typical period for reporting complaints data varied from one to six months, though one TMD did not include a specific period. 

Initial review periods were within one or two years from the date the TMD was made, though ASIC urged insurers to consider a shorter time frame.   

“A significant impact on the product such as a change to the TMD based on a review trigger, a significant dealing outside the target market, or a change in a product’s distribution channel would suggest that the TMD’s next ongoing review should be within 12 months,” it said.

The corporate regulator flagged that its initial “facilitative compliance approach” with the DDO regime has shifted to closer scrutiny with active supervision and enforcement.

ASIC added: “We have commenced civil penalty proceedings against a distributor of an investment product and an issuer of a credit product for alleged DDO breaches. We are also considering further stop orders and have several other DDO-related investigations underway.”

Life insurers should not adopt a ‘set-and-forget’ approach to their TMDs, the regulator warned, and insurers should demonstrate a consumer-first mindset through their DDO obligations. 

“The FSC has led compliance efforts with the new DDO regime by developing template target market determinations and data standards for the financial services industry, which have been adopted by life insurers, fund managers, and superannuation trustees,” an FSC spokesperson told Super Review.

“As with ASIC’s targeted reviews of DDO compliance over recent months, the FSC welcomes the additional insight and clarity around how the industry can improve its practices to better inform and protect customers.”

The organisation, which has more than 100 member companies, said it will liaise with the life insurance industry on whether updates to its TMD templates would be appropriate to reflect ASIC’s recent guidance.
 

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.

Recommended for you

sidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

3 months 3 weeks ago
Kevin Gorman

Super director remuneration ...

3 months 4 weeks ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

3 months 4 weeks ago

The Association of Superannuation Funds of Australia has tapped an experienced public policy executive as head of policy and advocacy....

1 hour ago

In a Senate submission, the Financial Services Council said super funds should be able to nudge members on engaging with their super and has cautioned against default pla...

9 hours ago

All merger proposals will have to be approved by the consumer watchdog under the sweeping merger reforms announced by the government on Wednesday....

9 hours ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND