ASIC announces incidental retail cover relief for insurers

ASIC has confirmed it will provide relief for insurers and brokers that clarifies their obligations when offering retail insurance as part of bundled business insurance contracts.

The corporate regulator has made a new legislative instrument, 2022/716, that exempts insurers and and brokers from certain retail client obligations in Chapter 7 of the Corporations Act 2001 for "incidental retail cover" — retail insurance cover provided to a business that forms a minor, incidental and inseparable part of an otherwise wholesale insurance product — provided in business insurance contracts.

"ASIC granted relief to reduce regulatory burden and provide certainty for industry that the retail client obligations do not apply to what are, in reality, business insurance products," ASIC said in a statement this week.

"This prevents compliance costs arising from the retail client obligations from being incurred and passed on to businesses.

"The relief also includes several conditions to ensure it is appropriately targeted and that the retail covers are genuinely incidental to, and inseparable from, the wholesale insurance product. For example, when a retail cover is offered as an optional extra, when the business client makes a separate decision to purchase it or pays an additional fee, the relief will not apply."

The relief officially commenced on Tuesday (16 August) and will expire in three years.

The news follows the announcement by the federal government this week that it has commenced a review of the ASIC industry funding model (IFM) which commenced in July 2017.

Treasury will lead the review in consultation with ASIC, the Department of Finance and the Department of the Prime Minister and Cabinet.

According to the government, the review will be forward looking and focused on identifying any changes to the IFM that may be required to ensure the settings remain appropriate.

“It is appropriate to review the IFM at this point given it has now been in place for five years, and over this period there has been substantial regulatory and structural changes within industry sectors resulting in increased cost pressures within certain sub‑sectors,” the review’s terms of reference state.

A number of issues fall under the scope of the review, which will each be considered and recommendations made where appropriate.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.