ASIC will ask, “show me”
By understanding the nuances between the duty of disclosure and the duty to take reasonable care, compliance managers can better equip financial advisers to handle life insurance complaints effectively. Through education, clear communication, and robust procedures, advisers can navigate these complaints, ensuring fair outcomes for clients and maintaining regulatory compliance.
Understanding Duty of Disclosure vs. Duty to Take Reasonable Care
Duty of Disclosure: Traditionally, the duty of disclosure required clients to disclose all relevant information that could affect the insurer’s decision to provide coverage. This duty significantly burdened clients, often leading to disputes when non-disclosure was discovered.
Duty to Take Reasonable Care: Recent reforms have shifted the focus to the duty to take reasonable care not to make a misrepresentation. This duty requires clients to answer questions from insurers honestly and to the best of their ability, considering their circumstances. This change aims to balance the responsibilities between insurers and clients, reducing the likelihood of disputes.
Here are some tips to help your financial adviser apply the principles of duty to take reasonable care in their practice by asking them to “show me” how they follow these steps:
1. Educate Clients
- Explain Obligations: Clearly explain to clients their obligations under the duty to take reasonable care and not make a misrepresentation. Use simple language and provide examples to ensure they understand.
- Provide Resources: Offer written materials or online resources that clients can refer to for more information about their duties.
2. Ask Clear and Specific Questions
- Tailored Questions: Ensure that the questions asked during the insurance application process are clear, specific, and relevant to the coverage sought. This helps clients provide accurate and complete information.
- Review Responses: Review the client’s responses carefully to identify any potential gaps or areas needing further clarification.
3. Document Everything
- Keep Records: Maintain detailed records of all client communications, including the information provided and any advice given. This documentation can be crucial in resolving disputes.
- Update Information: Regularly update client information to reflect any changes in their circumstances that might affect their insurance coverage.
4. Advocate for Clients
- Understand the Complaint: When a complaint arises, thoroughly understand the client’s perspective and gather all relevant information.
- Communicate with Insurers: Engage with the insurer on behalf of the client, presenting their case clearly and highlighting any mitigating factors.
5. Stay Informed
- Continuous Education: Stay updated on the latest regulatory changes and industry best practices related to the duty to take reasonable care.
- Training: Participate in regular training sessions and encourage colleagues to do the same to ensure everyone is knowledgeable about current standards.
6. Implement Best Practices
- Internal Policies: Develop and implement internal policies that align with regulatory requirements and industry best practices.
- Client Communication: Establish clear communication strategies to help clients understand their duties and the importance of providing accurate information.
7. Monitor and Review
- Regular Audits: Conduct regular audits of client files and complaint handling procedures to ensure compliance with regulatory standards.
- Feedback Mechanisms: Implement feedback mechanisms to learn from past complaints and improve future practices.
