ASIC Reforms

The Minister announced:

  • The creation of a new ASIC Deputy Chairperson role to build on and strengthen ASIC's leadership. Ms O'Dwyer said a second Deputy Chair will give ASIC greater flexibility to manage the breadth of its new powers and increased responsibilities. She added that the additional role would 'bring ASIC in line with its regulatory brethren at the Australian Competition and Consumer Commission (ACCC)'. The Minister said that she is seeking the required approvals under the Corporations Agreement with the States and Territories and that she intends to introduce legislation to amend the ASIC Act in the coming weeks.

  • The release of a revised Statement of Expectations for ASIC which includes a new 'competition mandate'. This will require ASIC to 'consider the effect that its work and the exercise of its powers will have on competition in the financial system'. Ms O'Dwyer added that the measure is consistent with the government's response to 2014 Financial System Inquiry Recommendations and complements other measures to support competition eg the Productivity Commission review of competition in the financial system. The Minister said the government will introduce legislation to reflect the change.

  • Confirmation of reappointments: The Minister also announced the reappointments of Deputy Chair, Peter Kell for a further one-year period from 6 May 2018 up to and including 5 May 2019; and John Price for a further two-year period from 21 March 2018 up to and including 20 March 2020.

Insurance

  • Consultation on extending unfair contract terms to life insurance and general insurance contracts: The Minister stated that the government will be consulting on changes to apply unfair contract terms to life insurance contracts as well as general insurance contracts in H1 2018 in response to the senate committee report on the general insurance industry and the Australian Consumer Law Review. The Minister commented 'While this will be a significant reform for industry, it is in the best interests of consumers and will bring the insurance industry into line with other financial services'.

[Note: The Minister flagged the possible extension of unfair contract terms to general insurance in her address to the Insurance Council of Australia Forum (see: Governance News 12/03/2018). A recent Consumer Action Law Centre report: Denied — Levelling the playing field to make insurance fair, argued strongly in favour of extending the unfair contract regime to insurance companies as well as describing how an effective unfair contract terms regime should be modelled for insurance (see: Governance News 19/02/2018).]

  • Life Insurance Report due at the end of the month: The Minister commented that the Parliamentary Joint Committee into the life insurance industry is due at the end of March. She added that she expected that the report will make recommendations on whether there is a need for further reform and improved oversight of the life insurance industry and on the sales practices of life insurers and brokers.

  • Mental health claims for disabilities: Ms O'Dwyer noted that this is an issue that the industry is currently contemplating and commented that the release of the Actuaries Institute Green Paper in 2017 was a 'welcome development'. More particularly, the Minister noted the issues highlighted in the paper around mental health claims eg definitions, data, rehabilitation and claims processing, that the industry 'needs to' consider. 'Given the incidence of mental health issues across the population, it is in the best interests of the community that the insurance industry, regulators and government work together to deal fairly and effectively with this issue. I look forward to seeing further progress in this area' she said.

Other reforms/priorities for the year ahead

  • Whistleblower protections: Referencing the Bill currently before Parliament, Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017, Ms O'Dwyer commented that the Bill incorporates the majority of the 35 Parliamentary Joint Committee's recommendations. Those not included, the Minister said, are under consideration by the government. On this basis, she expressed the hope that the Bill would be supported.

[Note: The Bill was discussed in Governance News 08/12/2018. The Bill was introduced into the senate on 7 December 2017 and referred to the senate economics legislation committee for inquiry and report. The report, released on 22 March recommends that the Bill be passed. The Committee states: 'On balance, the committee is satisfied that the bill is a move in the right direction and will be a valuable contribution to whistleblower protection. It notes that the government is continuing to work on its response to the PJC inquiry, and that further reforms may well be the result.' See: Senate Economics Legislation Committee: Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 Report 22/03/2017]

  • Reforms to address the mis-selling of unsuitable financial products to retail investors and consumers: Commenting on draft legislation released in December 2017 for new design and distribution obligations for issuers and distributors, and a new product intervention power for ASIC, the Minister stated that the consultation had shown that there 'is more work to do on these critical reforms'. She added the Bill would be introduced once these issues had been resolved and after additional consultation. Under the new regime, firms will be required to identify the target market for their product, and will need to design the product for that market.

[Note: Consultation on the draft Bill: Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers Bill) 2017 closed on 9 February. The draft legislation was discussed in Governance News 12/01/2018]

  • New financial adviser standards — a necessary means of professionalising the sector and rebuilding trust: Commenting on the new financial adviser standards and the new mandatory education requirements for financial advisers, Ms O'Dwyer stated that 'Every adviser has a role to play in rebuilding that trust, and these new educational requirements are a critical step towards professionalising the sector. Ultimately, the professionalization of the advice sector will be in the best interests of all advisers, existing and new, because it will ensure enduring consumer trust and confidence in the financial advice sector.'

[Note: Financial Adviser Standards and Ethics Authority (FASEA) released a draft code of conduct, and draft guidance on new education requirements for financial advisers for consultation. This is discussed in a separate post in this issue of Governance News 26/03/2018]