Disclosure documents – it’s all about the timing (and content)

I’m often asked when must a certain document be provided to a client?

Disclosure documents for general insurance generally have have 2 requirements:

• content requirements; and
• timing requirements

This article will focus on the timing requirements.

Customer/client journey

The simplest way to think about the timing requirements for disclosure documents is to think about the various customer touchpoints or the customer journey.

Insurance brokers often send an important noticedocument when invoicing clients containing all relevant information such as FSG, general advice warning, duty to take reasonable care, duty of disclosure etc. While convenient, care should be taken with this approach to ensure the regulatory timing requirements are met

Code requirements

Brokers and insurers (including underwriting agencies, TPAs and other material service providers) also have requirements under respective industry Codes to provide certain information at a specific time. The customer/client journey should not only be mapped out to cover regulatory disclosure documents but should also pick up Code requirements such as providing a Terms of Engagement (brokers).

The regulatory disclosure cycle

It should be noted that disclosure documents are only required to be provided to Retail clients however it is common practice for a FSG to be provided to both retail and wholesale clients.

A TMD is not a disclosure document as it only must be made available by a product issuer before it distributes a general insurance product. The product issuer must make a TMD available and a distributor must not engage in retail product distribution conduct unless a TMD is available or not required (see RG 274). It’s important to note that a TMD is not only relevant for Retail clients. The test is whether a Retail client could purchase the product, even if intended for Wholesale clients.

Let’s explore the disclosure documents relevant for general insurance based on the customer experience or journey. I’ve included the reference in the Corporations Act for the content requirements in case you wish to have a look at these requirements in addtiion to the timing requirements.

FSG

1. Obligation to give a FSG if financial services provided to a Retail client (s941A for licensees and s941B for authorised representatives)
2. Timing of FSG (s941D)
3. Content requirements (s942A – 942E including a combined FSG/PDS)

A FSG must be given to the (retail) client as soon as practicable after it becomes apparent that the financial service will be, or is likely to be, provided to the client, and in any event must be given to the client before the financial service is provided. (s941C provides situations in which a FSG is not required).

Practically speaking, the FSG will be provided before any financial product advice is provided, this means on appointment (for brokers) or at quote stage (for underwriters).

A claimant intermediary must provide a FSG before they provide any claims handling settling services to the client (s941C(7A)). This is because they are acting on behalf of the insured. A claims manager, acting on behalf of the insurer, is not required to provide a FSG, as the FSG was provided by the underwriter during the sales process.

FSG Website disclosure

If the financial service is financial product advice or dealing in a financial product for the purposes of implementing that advice. The information must contain the statements and information required in an FSG and be made available on the providing entity’s website by the time the entity would otherwise be required to give the client an FSG: section 6 of ASIC Corporations (Financial Services Guide) Instrument 2015/541 and section 941C(5A) and Info sheet 291.

Statement of advice (SoA)

For General Insurance, a SOA is only required where personal advice is provided to a retail client and the advice is about a general insurance product that is a:

• sickness and accident insurance product; or
• consumer credit insurance product.

1. The obligation to provide a SoA (s946A)
2. the timing requirements for a SoA (s946C)
3. content requirements (s947A – s947D). Note that a SoA can’t be combined with a FSG or PDS (947E)

Where the SoA is not the means by which the advice is provided, the SoA must be given before any further financial services are provided that arises ou of or is connected with that advice.

PDS

For general insurance, a PDS must be given if the issuer offers to issue the general insurance product or offers to arrange to issue the general insurance product to a retail client (refer RG 168)

1. The obligation to provide a PDS (s1012A-C).
2. Note that there are specific PDS requirements for general insurance quotes provided in the course of a telephone call unless it is an unsolicited call (s 1012GA)
3. Content requirements (s1013B – s1013G)
4. Note that a PDS must be lodged with ASIC, ‘in use notice’ (s1015B)

Generally, a regulated person should give a retail client a PDS at or before the time the person makes an offer to issue or arrange the issue of a financial product. In respect of a quote provided in a telephone call the insurer must give the client a PDS before the client becomes bound to acquire the product (under s1012B(4)) or as soon as practicable after the issue of the product (if s1012G applies).

Cash Settlement Fact Sheet (CSFS)

A CSFS must be provided to a Retail client where:

• there is an offer to settle all or part of an insurance claim using a cash payment; and
• the PDS provides other legal options to settle the claim or part of the claim such as repair or replacement (s948B)

The CSFS must be given when the offer to cash settle is made (s948D) and meet the content requirements (s948E – s948F)

A CSFS may be provided where there is an urgent financial need provided ASIC Corporations (Cash Settlement Fact Sheet) Instrument 2022/59

• the consumer has expressly instructed the insurer or its representative that they need immediate financial assistance
• the verbal cash settlement offer has been made within 14 days of the insurable event that is the subject of the claim, and
• the cash payment (together with any additional immediate cash payments under the same claim) does not exceed $5,000.

Note that there are conditions in the instrument including providing verbal information at the time of making the urgent cash payment and providing the CSFS within 48 hours (email) or otherwise 5 business days after making the cash payment.

In addition, ASIC has granted relief to exempt insurers from providing a CSFS where doing so creates risks of family violence. The relief is outlined in the legislative instrument, ASIC Corporations (Cash Settlement Fact Sheet and Confirming Transactions) Instrument 2022/809.

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