The Insurance Council of Australia (ICA) has called on the Australian Securities and Investments Commission (ASIC) to spell out how new conflict of interest rules will apply in practice.
In a Sept. 5 submission, ICA said ASIC’s draft update to “Regulatory Guide 181: Licensing – Managing Conflicts of Interest” offered useful examples but overlooked key areas like insurance distribution and remuneration.
“The practical examples provided in the proposed RG 181 are comprehensive but non-exhaustive, with a focus on investment and advice-related conflicts, and fewer examples provided for insurance, distribution and remuneration structures,” ICA said. It suggested adding scenarios involving volume-based incentives and white-labelled products sold through intermediaries.
ICA also stressed the need to recognise differences in how insurance is sold.
“As there are fundamental differences in the relationship with clients under these different distribution models, conflicts management practices and models will vary,” it said, noting the contrast between agents representing insurers and brokers representing clients.
On the scope of the obligations, the submission said the draft guidance appeared inconsistent. One section described the conflict management obligation as broad, while another endorsed a proportionate, risk-based approach depending on the seriousness of the conflict. ICA urged ASIC to align the wording to support consistent compliance across entities. It also recommended adding consideration of similar past conflicts when assessing risks.
The paper flagged uncertainty around several concepts. More detail was sought on how personal interests may give rise to material conflicts and on the draft reference to “minor ethical breach.” ICA warned that using the term “minor” could be read as suggesting such conflicts are acceptable.
Several examples in the draft were questioned, including whether charging excessive fees is in itself a conflict, how information sharing between clients should be handled in insurance claims, and whether preferential treatment in certain programs would be restricted.
ICA also asked ASIC to clarify structural conflicts, particularly when insurers encourage customers to take related products, and sought guidance on when insurer-expert relationships in claims assessments could create conflicts.
Finally, ICA’s submission suggested reordering sections of the draft to make guidance clearer and emphasised that disclosure remains a necessary tool, particularly where insurers rely on third-party distributors.
“We would welcome additional guidance and examples of effective disclosure practices including around timing, format and prominence,” it said.
