ASIC costs for insurance product providers drop significantly

The regulator’s annual dashboard, which outlines its regulatory costs for the last financial year, has revealed the total regulatory cost to be recovered through levies is $313.3 million or $19 million less than anticipated.  

In June, ASIC estimated total costs to be recovered through levies would amount to $332.3 million. Of that, it said at the time, the cost charged to licensees that provide personal advice to retail clients on relevant financial products would amount to $24 million.

In its final sum of costs, however, the regulator has slightly revised this figure noting that $22.8 million would be charged to these advisers or $1.2 million less than anticipated.

The cost of regulating licensees providing advice on products that are not relevant financial products has increased slightly from an earlier predicted $66,000 to $73,000.

But the biggest hike comes for licensees that provide general advice only, with real costs placed at $1.3 million instead of the predicted $505,000.

Moreover, on the insurance front, costs are expected to decrease for product providers from $29.4 million to $24.3 million.

Earlier in 2022, in its submission to the regulator, the Financial Planning Association (FPA) warned that the levy amount each year has proved to be unpredictable, making it “practically impossible” for a financial planner to effectively budget for this business cost.

“The estimate for the 2020–21 year was $1,500 plus $3,183, which was a further increase of 31 per cent from the prior year. The FPA notes 2019–20 estimate was wrong by 54 per cent — that is, between the CRIS and the final. This clearly demonstrates the trend of the actual levy figure being significantly higher than estimates,” the FPA said.

Responding to this argument, one shared by other respondents too, the corporate regulator defended its approach by explaining that the metrics used reflect the “best available information we have at that time”.

“The estimated levies will differ from the actual levies and are a guide only”.

“In the case of our enforcement activities, matters can evolve as investigation and litigation progress. For example, our costs may be higher than anticipated due to a greater-than-expected demand on resources, or they might be lower if a matter is finalised sooner than expected,” ASIC said.

“We cannot predict all changes in our operating and regulatory environment. It is important that we maintain flexibility in our resourcing to adapt to new developments and respond to misconduct as it arises. This is likely to result in some variance between our budgeted costs and our actual costs over the year,” it added.

Moreover, the regulator argued that it has “taken steps” to incorporate more “up-to-date actual enforcement costs” into its estimates. This, it said, “may reduce the variances between our estimates and actual costs”.

“We will continue to explore ways to improve our estimates”.