Last week ASIC released Class Order CO 11/842 (CO 11/842) which allows a regulated person (as defined in s 1011B of the Corporations Act 2001 (Cth)) to not give a Product Disclosure Statement (PDS), or to give the PDS after the telephone call, depending on whether the retail client wants to be given a PDS at the time.
Background
In our alert last year, we discussed ASIC’s proposal to provide relief which changes the timeframe in which insurers are required to give a PDS if providing a quote for general insurance products over the telephone.
Clients often request quotes for general insurance products over the telephone as they “shop round” between insurers. ASIC found that general insurers may provide either:
“Indicative quotes” - which involve the insurer asking the client a number of questions to establish whether the client is eligible for the product and core underwriting questions to produce an indication of the premium that would be payable. The client is advised that the final premium amount calculated after considering all of the underwriting questions may be different; or
‘Full quotes’—which involve the insurer asking all of the underwriting questions and providing to the client a final premium amount. The quote can be accepted by the client, in that:
the client may act on the quote by applying for the general insurance product on the basis of the information provided to obtain the quote; and
if the client applies for the general insurance product on the basis of that information, the premium amount that is charged will be the premium amount that has been quoted.
Respondents from the general insurance industry noted that after receiving a full quote the client may choose to:
(a) apply for and acquire the general insurance product immediately;
(b) immediately decline to apply for the general insurance product at all; or
(c) not proceed to apply for the general insurance product immediately, but have the option of doing so at a later time.
The legislative requirement to provide a PDS during a solicited telephone call to a retail client prior to CO 11/842 was outlined in our last alert. ASIC agreed with general insurers’ view that indicative quotes are not an invitation to apply for the product specified in the quote and do not trigger the requirements to provide a PDS.
However ASIC disagreed with general insurers’ view that the existing legislative concessions also apply to the situation where the client is given a full quote and the client is given the option of applying for the product specified in the quote at a later time. ASIC was of the view that a PDS was required to be given at or before the time the quote was given in that scenario. Following consultation with the industry and Treasury after ASIC’s release of Consultation Paper 144, ASIC has issued CO 11/842 to resolve the uncertainty.
CO 11/842
Under CO 11/842, which enacts a new s 1012GA to the Corporations Act 2001 (Cth), where a regulated person:
(a) makes an offer to issue, or an offer to arrange for the issue of, a general insurance product during a telephone call by or at the same time as giving a quote to the client;
(b) has orally communicated the following information to the client before the offer is made:
(i) that the cover is subject to exclusions and limitations (as applicable) and that the information about the exclusions and limitations (as applicable) is contained in a PDS for the product; and
(ii) that the level of cover under the product may be different to that under general insurance products available from other general insurers; and
(c) has asked the client whether the client would like a PDS to be given for the product but does not influence the client’s decision to elect to be given the PDS,
if, after being provided with the information specified above, the client states that they:
(d) want to be given a PDS – the regulated person need not give the PDS at or before the time when the offer is made, but must instead give the client the PDS as soon as practicable after that time; or
(e) do not want to be given a PDS – the regulated person does not have to give the PDS in relation to the making of the offer.
If the client then decides, in the course of the telephone call or subsequently, to apply for the general insurance product after receiving the quote, or is issued the product, the regulated person may be required to give the PDS for the product under section 1012B (as affected by section 1012G).
CO 11/842 applies to solicited telephone calls to retail clients on general insurance products by a general insurer or an intermediary. It does not apply to a quote given in the course of, or because of, an unsolicited telephone call where the anti-hawking provisions continue to apply.
ASIC noted that the Government is considering the imposition of additional requirements for provision of a Key Facts Statement about home building and home content insurance policies (see Treasury’s consultation paper Reforming flood insurance: Clearing the waters and our alert on this consultation paper here). ASIC intends to review the form and conditions of CO 11/842 following the implementation of Key Fact Statement requirements.