Australia: How to take advantage of ASIC's new relief for telephone sales of insurance

Are you providing customers with insurance quotes by telephone without first providing a product disclosure statement (PDS)? In some cases you might be in breach of the law, according to ASIC.

The problem

It is common practice for insurers and intermediaries to provide quotes for general insurance over the telephone without first providing a PDS. It enables customers to obtain quotes for comparative purposes, without the delay associated with the delivery of a PDS. It also significantly reduces the compliance costs for insurers and makes the sales process simpler and more effective.

However, ASIC considers that when insurers and their agents provide full quotes to customers, and not merely indicative estimates, they may be making offers to issue insurance. In such cases, the Corporations Act requires the offeror to provide each customer with a PDS at or before the time the offer is made (unless the customer declines the offer or else requests that the insurance be issued immediately).

The solution

To address the perceived gap between insurers' practices and ASIC's interpretation of the Act, ASIC consulted with industry. Exactly 12 months after starting that process, ASIC announced that it had issued class order relief, details of which can be found here.

In a nutshell, the class order relief enables insurers and intermediaries to continue their existing practice of providing quotes over the telephone if they meet the conditions specified in the relief.

What you need to do

ASIC's relief only applies to quotes for general insurance given over the telephone if certain conditions are met. To take advantage of the relief, product issuers need to ask these questions:

• Is this a cold call? Did this telephone call come about because of a cold call?

  If the answer to either of these questions is 'yes' then the relief does not apply. ASIC declined to give relief for quotes given during, or because of, unsolicited calls.

• Did the customer ask me to provide a quote?

  If the customer did not specifically request a quote then the relief is unavailable.

• Before providing the quote, have I clearly informed the customer that:
• • the policy contains exclusions and limitations;
  • the PDS contains information about those exclusions and limitations; and
  • the policy may provide a different level of cover than other insurance products?

• You must inform the customer of all of these things in order for the relief to apply.

• Before providing the quote, have I asked the customer whether they want to be given the PDS? Have I made sure not to influence their answer?

  Customers must be free to choose to receive the PDS when requesting a quote. If they ask for the PDS then you must give it to them as soon as practicable afterwards.

ASIC's relief takes effect from 28 November 2011. Before then, you should review your existing quote processes to ensure that they fall within the conditions specified in the class order. If you have any doubts about whether you can satisfy those conditions, we can assist you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.