Over the past 6 months I have been asked by our partners many times about whether Eric will continue to offer the full range of products via our dealer, OEM and salary packaging partners. In short, the answer is a strong YES……we remain fully committed to providing a range of products that provide better outcomes for consumers and promote the long-term sustainability of the add on insurance industry.
To that end, we welcome two important changes to the ASIC’s regulatory powers. These changes, when implemented, will ensure financial service providers (FSP’s) are providing suitable financial products to consumers which create genuine value.
Product Design and Distribution Obligations (PDDO)
The first of the changes are the new ‘Product Design and Distribution Obligations’. The new law creates 4 new design obligations which are imposed on the organisation responsible for disclosing under the Corporations Act. The person or company must:
- make a determination in relation to the target market for the product;
- regularly review the target market determination to ensure it remains appropriate;
- keep records of the person’s decisions in relation to the new regime; and
- notify ASIC of any significant dealings in a product that is not consistent with the target market determination for that product.
Put simply, it will be our obligation to ensure that we clearly define who the target market is for each product and monitor the sale of products against the identified target market. As part of our ongoing product development process, we will need to regularly review the performance of each product, including the chosen distribution channel, to ensure it is providing the stated consumer outcomes.
Product Intervention Powers (PIP)
The second change gives ASIC new ‘Product Intervention Powers’. These new power permits ASIC to intervene and take “temporary action where financial and credit products have resulted in or are likely to result in, significant consumer detriment.” This can result in a product being banned for up to 18 months or limit the distribution of a product to certain channels which are more consistent with the target market.
ASIC recently released a consultation paper on how it intends to use the PIPs. This paper is currently the subject of public consultation and will be finalised in September 2019.
The way forward
We have embraced these new changes and believe that they are integral to ensuring that consumers are treated fairly and receive good value for the insurance products they purchase. We have already made numerous changes to the construction of our range of products with these powers in mind, and our new genesis sales system has been designed to ensure that only products that provide value to customers will be offered.
Whilst we have seen a number of insurers step back or out of this market, we have chosen to address the concerns of both regulators and the community to make positive change and look forward to continuing our relationship with our partners and most importantly our customers.
Chief Executive Officer