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.
𝙏𝙝𝙚 𝙞𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙨𝙖𝙡𝙚𝙨 𝙥𝙧𝙤𝙘𝙚𝙨𝙨 – 3 𝙥𝙧𝙚𝙡𝙞𝙢𝙞𝙣𝙖𝙧𝙮 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨
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
𝙏𝙝𝙚 𝙘𝙪𝙨𝙩𝙤𝙢𝙚𝙧 𝙞𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙨𝙖𝙡𝙚𝙨 𝙥𝙧𝙤𝙘𝙚𝙨𝙨
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.
𝘼𝙩 𝙚𝙣𝙜𝙖𝙜𝙚𝙢𝙚𝙣𝙩
provide the client with:
1. Terms of engagement (Brokers Code)
2. FSG (AFSL requirement)
𝙉𝙚𝙚𝙙𝙨 𝙖𝙣𝙖𝙡𝙮𝙨𝙞𝙨
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]
𝙌𝙪𝙤𝙩𝙞𝙣𝙜 𝙨𝙩𝙖𝙜𝙚
1. Provide the PDS [AFSL]
𝙈𝙖𝙥𝙥𝙞𝙣𝙜 𝙩𝙝𝙚 𝙨𝙖𝙡𝙚𝙨 𝙥𝙧𝙤𝙘𝙚𝙨𝙨
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