Onerous October dawns for red tape-laden sector

As of this week, life insurers, fund managers and financial advisers have several new reforms to abide by, including new rules for individual disability income insurance; new reference checking and information-sharing guidelines; new breach reporting requirements; new “duty to take reasonable care not to make a misrepresentation” instructions; anti-hawking reforms; deferred sales for add-on insurance; and internal dispute resolution.

Slated to improve consumer and business outcomes, the new changes are being described as the most significant and wide-ranging set of reforms, ever, for a sector already laden with layers of red tape.

As of last Friday, financial services licensees are required to report any breaches they discover, including their own, even if the breach occurred before 1 October, with data said to be made public from late next year.

And while all are considered disruptive in their own regard, none more so than the new breach reporting requirements, the design and distribution obligations (DDO) are among the most onerous.

In a bid to stall their introduction, the Association of Independently Owned Financial Professionals (AIOFP) launched a petition last week asking the government to press pause on DDO until mid-next year.

“The latest consent forms and DDO legislation have been introduced during the worst of COVID where implementation confusion is widespread among product providers, regulators, advisers, and expensive for consumers. This has been well documented in recent times,” the AIOFP’s petition justification reads.

And while the Financial Services Council (FSC) hasn’t been as forward in its messaging, it did refer to DDO as a “red tape burden” in a statement inked on Friday.

“The red tape burden from this raft of reforms is significant and can add to the cost of delivering products and services,” the FSC CEO, Sally Loane, said.

But, unlike the AIOFP, the FSC praised the DDO’s ability to improve consumer outcomes.

“The FSC recognised the significance of the DDO changes early, given we have members across many affected sectors,” Ms Loane said.

“We are confident that the FSC, working closely with our members, has done as much as we can to help businesses transition to the new regime. We are also pleased ASIC has said it will take a ‘reasonable approach’ to the start of the regulations, which should assist businesses as they adapt.”

However, despite all preparation, October is expected to be a tough month for the already shrinking industry.