When speaking to clients who are concerned about the complexity of compliance, I advise aligning compliance obligations with the customer experience.
This enables us to think about compliance in a logical, systematic manner. The risk of non-compliance, regulatory enforcement action & customer detriment is managed.
๐๐๐ ๐๐ฃ๐จ๐ช๐ง๐๐ฃ๐๐ ๐จ๐๐ก๐๐จ ๐ฅ๐ง๐ค๐๐๐จ๐จ – 3 ๐ฅ๐ง๐๐ก๐๐ข๐๐ฃ๐๐ง๐ฎ ๐ฆ๐ช๐๐จ๐ฉ๐๐ค๐ฃ๐จ
Answering 3 simple questions sets the signage for the customer sales pathway.
1. Is the client retail or wholesale?
It is important to understand the disclosure documents & warnings that must be provided.
This is a 2 step process.
a) is the customer an individual or small business (as defined)? If yes, keep going, no = wholesale client
b) does the product fall within s761G(5)(b) Corps Act as defined in Regs 7.1.11 – 7.117A? if yes = retail, if no = wholesale.
2. Is this a consumer insurance contract?
This is important to determine whether the duty to take reasonable care not to make a misrepresentation or the Duty of disclosure applies.
Either:
a) falls within the definition of s11AB Insurance Contracts Act; or
b) is deemed to be a consumer insurance contract by the insurer giving a written notice to that effect
3. Are you a Distributor (GI Code) or a [NIBA member] Insurance broker or AR of a broker (Brokers Code).
This determines whether the standards & obligations of the relevant industry Codes apply to you during the sales process
๐๐๐ ๐๐ช๐จ๐ฉ๐ค๐ข๐๐ง ๐๐ฃ๐จ๐ช๐ง๐๐ฃ๐๐ ๐จ๐๐ก๐๐จ ๐ฅ๐ง๐ค๐๐๐จ๐จ
Once you have the information, it is relatively easy to map compliance obligations to each stage of the customer insurance sales process
As an example – a retail client for a consumer insurance contract & you are an insurance broker acting for an insured
or in plain language, a new client asks about insurance for their home.
๐ผ๐ฉ ๐๐ฃ๐๐๐๐๐ข๐๐ฃ๐ฉ
provide the client with:
1. Terms of engagement (Brokers Code)
2. FSG (AFSL requirement)
๐๐๐๐๐จ ๐๐ฃ๐๐ก๐ฎ๐จ๐๐จ
1. provide a warning – general or personal advice [AFSL]
2. understand the insurers or underwriting agency’s underwriting questions to respond to the insured’s duty to take reasonable care not to make a misrepresentation [Insurance Contracts Act]
3. Disclose $$ remuneration (or an estimate & the actual amount as soon as reasonably practicable) [Code]
4. ensure the client falls within the relevant TMD [AFSL]
๐๐ช๐ค๐ฉ๐๐ฃ๐ ๐จ๐ฉ๐๐๐
1. Provide the PDS [AFSL]
๐๐๐ฅ๐ฅ๐๐ฃ๐ ๐ฉ๐๐ ๐จ๐๐ก๐๐จ ๐ฅ๐ง๐ค๐๐๐จ๐จ
There may be other obligations that arise during the sales process such as misleading or deceptive conduct, hawking etc however you can see that this is merely a case of mapping out the sales process & assigning the compliance obligation at each stage