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What are conduct obligations as distinct from financial advice?

What are conduct obligations as distinct from advice obligations? MBIE’s review of insurance contract law includes insurer conduct in its scope and takes a longer view of the need to ensure good conduct in the insurance market.

Pondering where the review may head, I reviewed ASIC’s reports on direct sales processes. Those clearly identify practices that fell short of acceptable, and details what it sees as effective remedies. A good reference point is there report “Rep587: The sale of direct life insurance” and “Rep588: Consumers experiences with the sale of direct life insurance”. The conduct obligations envisaged by the reports include:

(a) Provide adequate explanations of key exclusions and future cost
(b) Stop pressure selling
(c) Introduce a deferred sales model for downgrades
(d) Stop using techniques that frame consumers’ choices
(e) Establish a clear target market for limited value products and only sell these products where there is genuine consumer need
(f) Strengthen protections for vulnerable consumers
(g) Ensure that automatic cover increases do not exceed what the consumer can claim

Those all look like obligations distinct from the provision of financial advice as defined in our law, and hence apply to product providers even if not providing advice. If you group them under main headings they can be further summarised as:

• Sales practices must protect vulnerable consumers – which is probably not just an insurance-related issue (items b, d, and f)
• Information asymmetry must be addressed throughout the sales process (items a, c, and e)
• Eligibility is the responsibility of the insurer – including both at policy commencement and during the life of the policy (item g)



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