ASIC issues life insurance product stop order

The Australian Securities and Investments Commission (ASIC) announced on Tuesday that it has issued an interim stop order on Clearview Life Assurance Limited’s (Clearview Life) Clearview ClearChoice Income Protection Cover and Accidental Income Protection Cover (Income Protection Cover). The stop order relates to two underlying products.

ASIC said it issued the stop order because of deficiencies in the target market determination (TMD). The regulator added it is considering further stop orders for other insurance products.

The interim orders prohibit Clearview Life from engaging in retail product distribution and providing general advice in respect of the product for new customers. The orders are valid for 21 days unless revoked earlier.

ASIC said it made the interim stop order in relation to Clearview Life’s Income Protection Cover to protect consumers from acquiring life insurance that may not be consistent with their objectives, financial situation or needs.

ASIC added it was concerned that the TMD failed to consider the impact of key eligibility criteria, such as age and minimum employment criteria, on the suitability of the product for certain classes of consumers. As a result, ASIC was concerned that the target market contained classes of consumers for whom the product was not likely to be appropriate.

The regulator said it is also concerned that the TMD does not specify any meaningful distribution conditions to ensure that the Income Protection Cover would likely be distributed to consumers in the target market and likely exclude distribution to consumers in the negative target market.

ASIC said it expected Clearview Life to consider the concerns raised regarding the TMD and take immediate steps to ensure compliance. ASIC will consider making a final order if the concerns are not addressed in a timely manner. Clearview Life will have an opportunity to make submissions before a decision is made about any final stop orders.

ASIC has now issued 39 interim stop orders in relation to insurance products following its risk-based and targeted review of insurance TMDs. ASIC’s review covered over 100 TMDs for general and life insurance products.

To date, ASIC has issued 81 interim stop orders under the Design and Distribution Obligations (DDO), including the stop order for Clearview Life. Of these, 74 interim stop orders have been lifted following actions taken by the entities to address ASIC’s concerns (including where eight products were withdrawn). Seven stop orders remain in place.

DDO requires firms to design financial products that meet the needs of consumers and to distribute those products in a more targeted manner. A TMD is a mandatory public document that sets out the class of consumers a financial product is likely to be appropriate for and matters relevant to the product’s distribution and review.