ASIC releases Regulatory Guide on review and remediation for retail clients

Sophie DevittThe Australian Securities and Investments Commission (ASIC) has released Regulatory Guide 256 ‘Client review and remediation conducted by advice licensees’. This guide sets out ASIC’s guidance on review and remediation conducted by Australian financial services (AFS) licensees who provide personal advice to retail clients.

All AFS licensees have an obligation to ensure their financial services are provided efficiently, honestly and fairly and this includes taking responsibility for the consequences of their actions if things go wrong and remediating clients who have suffered loss or detriment as a result of misconduct or compliance failure. The review and remediation process is generally a set of activities within the business to review the services provided to clients (where a systemic issues caused by misconduct or compliance failure has been identified) and to remediate those clients who have suffered loss/detriment as a result.

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ASIC raises concerns about add-on insurance sold through car dealers

1202398876_1_AUGroups(Alex_Samson_lr_Brisbane)The Australian Securities and Investments Commission (ASIC) has released a report on add-on general insurance policies sold through car dealers. ASIC have concluded that the market is failing consumers and there are serious problems which need to be addressed immediately and comprehensively by insurers. This follows on from two reports released earlier this year about the sale of add-on life insurance by car dealers, (see our previous post here).

The new report reveals ASIC’s key findings regarding add-on insurance, including that:

  • Consumers receive little financial benefit from add-on insurance as they receive very low claim payouts;
  • Car dealers earn over four times more in commission than what consumers receive in claims, with commissions as high as 79%;
  • The insurance products are commonly packaged up into the consumer’s car loan as a single upfront premium which can substantially increase the cost of the product, decrease consumer awareness about the policy and create unfair outcomes if the consumer repays the loan early; and
  • The car sales environment hinders consumers making good decisions due to the conflicts of interest and pressure sales built into the distribution model, with consumer focusing on purchasing the car rather than the complex insurance policy.

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Spring brings Federal and Queensland class actions developments

Benjamin Hine The sun shines on class actions in Queensland

On 5 August 2016, the Queensland government announced its intention to introduce a class action regime. This is the first time class actions will be heard in Queensland courts.

Previously, Queensland plaintiffs wanting to commence group proceedings have been required to pursue their claims in other jurisdictions. Notable recent examples include the Queensland floods and the Bank of Queensland class actions which were both commenced in the NSW Supreme Court.

The new class action regime in Queensland is likely to closely mirror the schemes that are already in place in NSW, Victoria and the Federal Court of Australia.

Federal Court Practice Note to be released shortly

The Federal Court of Australia has recently concluded its public consultation for an updated Class Actions Practice Note. We have previously reported on the Court’s decision not to include a specific class actions area under the ‘National Practice Areas’ (NPA) structure (see here).

The structure means that class actions will continue to be divided according to their subject matter. For example, a securities class action would be allocated to the ‘Commercial and Corporations NPA’, and be case managed pursuant to the Class Actions Practice Note. It is worth noting that the majority of class actions in Australia are commenced and managed in the NSW Registry of the Federal Court of Australia.

The Court’s updated Practice Note is expected to be released this month. We will report further on the Federal Court Practice Note and developments in Queensland as more information becomes available.

This blog was co-authored by DLA Piper solicitor Vanessa Reinehr.

ASIC releases regulatory guide on digital financial product advice

1202398876_1_AUGroups(Alex_Samson_lr_Brisbane)ASIC has released guidance on providing digital financial product advice to retail clients. Regulatory Guide 255 covers some of the issues that digital advice providers need to consider when operating in Australia, from the licensing stage through to the provision of the advice.

Digital advice is the provision of automated financial product advice using algorithms and technology, with no direct involvement from a human advisor, and can be general or personal advice. The provision of digital advice in Australia has grown rapidly since 2014 and ASIC expects the growth to continue. ASIC supports the development of the digital advice market, given that it can be a convenient and low-cost option for retail clients who may not otherwise seek advice.

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ASIC maintains dollar disclosure relief

Sophie DevittASIC has made a new legislative instrument  to replace three class orders on dollar disclosure (CO 04/1431, CO 14/1433 and CO 04/1435). They were due to expire on 1 October 2016 and 1 April 2017, but the new legislative instrument maintains the relief that they provided.

The dollar disclosure provisions in the Corporations Act require various costs, fees, charges, expenses, benefits and interests to be stated in dollar amounts in Statements of Advice, Product Disclosure Statements and periodic statements. The legislative instrument provides exemptions from these requirements in certain circumstances. For example, the instrument exempts a PDS from having to disclose the dollar amount of a non-monetary benefit where certain conditions are met.

Further information can be found here.

This blog was co-authored by DLA Piper partner Sophie Devitt and DLA Piper gradutate solicitor Ann-Marie Coleman.

Settlement reopened due to fraud

james.morse_clrIn Hayward v Zurich Insurance Company plc [2016] UKSC 48 the Supreme Court of the United Kingdom considered whether a settlement agreement could be set aside in circumstances where proof (or, rather, further proof) of a dishonest claimant’s fraud was subsequently established.

At the time of settling an insurance claim in 2003, the insurer knew the claimant was exaggerating his injuries the subject of the claim.  However, in 2009, evidence surfaced which proved the exaggeration was to a greater extent than initially known, and the insurer sought to set aside the previous agreement.

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Bank Fees Class Action – High Court Judgment Imminent

james.morse_clrThose of you following our coverage of one of the commonly termed ‘Bank Fees Class Actions’; namely, the proceedings of Paciocco & Anor v Australia and New Zealand Banking Group Limited, presently before the High Court of Australia, will be pleased to hear judgment is set to be delivered at 10.00am on Wednesday, 27 July 2016, in Brisbane.

As these proceedings are something of a test case for a number of other ‘Bank Fees Class Actions‘, it appears the industry is only a matter of days away from getting some real clarity around this longstanding saga.

The Insurance Flashlight team will provide an update after judgment has been delivered – so please stay tuned.

Queensland WorkCover amendments to render contractual indemnities void

paul.baxterIt is a serious matter to interfere with the rights of parties to agree between themselves to whatever contractual terms they chose. There is currently a Bill before the Queensland parliament proposing a significant change to the way businesses are allowed to contract with each other and allocate risk for injury to workers.

If passed into law, the Bill will render void and unenforceable, certain contractual clauses where an employer, effectively indemnifies another entity against contribution claims the employer might otherwise have had for damages for injury to a worker. It is doubtful the full ramifications of this proposal have been adequately considered.

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Burroughs digs deep to convince Federal Court he is fit and proper

chris lisicaStephen Burroughs, a former manager of a general insurer whose conduct in the late 90s was found to have contributed to the infamous collapse of HIH, is again able to take up a senior insurance role after his disqualification was revoked by the Federal Court of Australia.

In 2004, the Australian Prudential Regulation Authority (APRA) disqualified Burroughs on the basis he was not a fit and proper person to be, or act as, the holder of a senior insurance role pursuant to s 25A(1) of the Insurance Act 1973 (Cth) (the Act). This decision was based on the applicant’s conduct in a number of reinsurance transactions which effectively concealed the insurer’s under-provisioning from auditors (it was the subsequent unexpected losses suffered by HIH as a result of this under-provisioning which was found to have substantially contributed to its collapse).

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Can a bankrupt maintain legal action on a TPD claim?

Clancy ODonovanIn Berryman v Zurich Australia Ltd [2016] WASC 196, the Supreme Court of Western Australia held a bankrupt, Berryman, was able to maintain legal action in his own name, claiming TPD insurance benefits from Zurich.

The Bankruptcy Act 1966 (Cth) relevantly provides:

  • an action commenced by a person, who subsequently becomes a bankrupt, is stayed until the trustee makes an election to prosecute or discontinue the action (ss 60(1)(2) & (3)); however
  • a bankrupt may continue in his or her own name, an action commenced in respect of any personal injury or wrong done to the bankrupt (ss 60(4) & 116(2)(g)) .

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