How do you review 2012 as a year for you and your office? What are you most proud of?
2012 was a year in which we made a lot of significant and at times difficult reforms in the financial services portfolio.
We moved to improve consumer rights in the insurance sector by establishing the legislative framework for a standard definition of flood and the provision of a key facts sheet.
Through FOFA we are creating a more competitive, client-focused market for financial products and advice, to ensure Australians can access good quality financial advice and give the financial services industry a stronger foundation for growth by:
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Creating a duty for financial planners and advisers requiring them to act in the best interest of their customers
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Creating a new form of financial advice licence, so up to 10,000 accountants are able to provide a much broader range of financial advice than they were previously able to.
How well do you feel financial planners have handled the FoFA reforms? How have you made that process easier for them?
The Future of Financial Advice (FOFA) reforms represent a major overhaul of the Australian financial advice industry. The reforms are intended to strengthen investor protection and increase access to financial advice for retail clients. Key reforms include:
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a ‘best interests’ duty requiring financial advisers to act in the best interests of their clients;
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greater transparency on fees charged to clients, including a ban on conflicted remuneration (i.e. commissions and volume-based payments) and a requirement to obtain client agreement to ongoing advice fees; and
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enhanced disclosure of ongoing advice fees.
The Government recognises the significance of these reforms for the financial services industry and that the industry is working hard to meet the higher conduct standards expected of them to better protect their clients.
As with any significant structural reform, there will be a need for the financial advice industry to change their practices and processes in order to comply with the new requirements.
The benefits which consumers will enjoy as a result of the reforms will lead to greater trust and confidence in the finance industry. This will, in turn, contribute to an increased demand for advice and new opportunities for the financial advice industry offsetting any transitional costs to comply with the new requirements.
Since the initial announcement of the FOFA reforms in 2010, the Government has taken a number of decisions concerning the detail of the reforms. Many of these decisions relieve businesses from some of the regulatory burden associated with the original proposals. The Government has also delayed the mandatory start date by one year to 1 July 2013.
In addition, ASIC has announced that it will take a facilitative compliance approach for the first year of mandatory application to assist industry in adjusting to the reforms.
How effectively have the benefits of the National Disability Insurance Scheme been relayed to state governments and the wider public? Is there still work to be done on that front?
The Commonwealth, and all state and territory governments have been and will continue to work closely on the NDIS.
At the meeting on the 28 July 2012, the Council of Australian Governments agreed that, as a first step to settling the design of the NDIS, consultation should occur with people with disability, their families and carers, the workforce and disability sector and peak bodies. These consultations occur through a number of mechanisms established across the Commonwealth and States and Territories.
Five formal engagement mechanisms are being used to enable participation of stakeholders, including people with disability, their families and carers in the decision making process and at key points in design and implementation:
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NDIS Advisory Group provides independent advice to the Select Council on Disability Reform on advice from expert groups, bilateral meetings with state based advisory groups and peak bodies and NDIS Your Say Forum.
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Expert Groups provide technical advice to the Advisory Group on Choice and Control; Eligibility and Assessment; Quality, Safeguards and Standards; and Workforce and Sector Capacity.
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National Disability and Carers Alliance – is leading grassroots engagement across the country, through forums with people with disability, their families and carers and service providers on the design of the NDIS, reporting to the Advisory Group monthly.
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‘NDIS Your Say’ online forum which commenced in June 2012 seeks feedback from the wider public on key questions.
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NDIS Launch Transition Agency is undertaking a co-design process on operationalising the high level scheme design. This is being supplemented by a range of other engagements at the local level.
You claimed the recent Insurance Contracts Amendment Bill will mean less red tape for insurers and better disclosure for consumers, can you expand on why that is the case?
The Insurance Contracts Act 1984 (the Act) is now close to three decades old. At the time of the Act’s commencement products offered by insurers and the state of market were vastly different from today. Today we see an increased reliance on electronic communication and a more diverse range of insurance product offerings. These changes, while generally beneficial, pose challenges for both consumers and insurers.
The Insurance Contracts Amendment Bill (the Bill) addresses these challenges by introducing measures to give effect to reforms that improve the operation of the Act. The measures in the Bill are important for both insurers and consumers alike, as they will reduce complexity and provide certainty.
The Bill makes changes to:
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enable insurers to provide statutory notices and documents to consumers electronically. This will not only reduce compliance costs for the insurance industry, but will also bring the insurance industry into line with other industries;
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provide life insurers with additional flexibility in the types of remedies they can use when they are dealing with situations where an insured has made an innocent misrepresentation or fails to comply with the duty of disclosure; and
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ensure consumers provide better disclosure before entering into contracts, reducing the scope for disputes when a claim is made.
How are you helping to solve Australia’s underinsurance problem?
There are problems with both non-insurance and underinsurance in the Australian community.
For non-insurance, where consumers do not hold insurance for some of the risks they are exposed to, the Government is helping to provide better information about risks, so that people can make better decisions about getting the insurance cover they need. One example of where we’re doing this is through the introduction of the National Flood Risk Information Portal. The Government is also looking at ways to address affordability issues, for example by reducing risk through mitigation.
For underinsurance, where consumers do not hold adequate cover for the losses they suffer, the Government is improving transparency so people are better aware of the level of cover under their policies. The introduction of the Key Facts Sheets will draw attention to the difference between concepts such as ‘sum insured’ and ‘total replacement value’.
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