(Re)Insurance & Regulation Focus - fortnight commencing 9 June 2025
10 June 2025
Key developments in the last fortnight
Yet another UCT disappointment for ASIC
ASIC has failed in its appeal to the Full Federal Court to overturn an earlier Federal Court decision that Auto & General’s home and contents insurance policies did not contain an unfair contract term (UCT). As a quick refresher, in March 2024 the Federal Court dismissed ASIC’s UCT action against Auto & General alleging that a term requiring policyholders to notify Auto & General “if anything changes” to their home and contents was unfair, stating that the effect of the Insurance Contracts Act (ICA) provisions including the duty of utmost good faith, was to imply a term into the insurance policy that would prohibit opportunistic reliance on the term by an insurer. The Full Federal Court agreed with the primary Judge and dismissed ASIC’s appeal, believing that the notification term in the insurance contract was an attempt to “provide an easily understood articulation of the parties’ respective rights in a complex legal relationship” where ASIC viewed it “with an eye zealously attuned to the detection of error, to assert the existence of a misstatement”. This follows another unsuccessful UCT case (ASIC v HCF Life) in which the relevant term was also found not to be unfair on the basis of the insurer’s statutory obligations under the ICA that limited the imbalance of power caused by the term in question.
ASIC imposes licence conditions to address concerns of unlicensed advice
New licence conditions have been imposed on Kalkine Pty Ltd’s (Kalkine) financial services licence requiring the engagement of an independent consultant to review, assess and report to ASIC whether client interactions are compliant and supervision mechanisms are adequate. If the consultant’s review identifies any shortcomings, they will be required to make recommendations which Kalkine must implement. This follows concerns raised by ASIC that customer service representatives of Kalkine were providing unlicensed advice to clients. The particular concerns involve Kalkine’s Indian based representatives providing personal advice as part of the sale of a subscription service, where Kalkine’s licence only authorises the provision of general advice, and misrepresenting to customers the kind of advice that was being given. As a result, ASIC believes that Kalkine’s compliance processes may be inadequate. ASIC Deputy Chair Sarah Court used the announcement to remind licensees of their responsibility for the conduct of representatives and the need to have supervision arrangements in place to ensure compliance with the law.
ASIC acts on concerns Kalkine Pty Limited offered unlicensed advice
Unlicensed issuing by authorised representatives
The Full Federal Court has re-examined the Qoin Wallet case following an appeal from ASIC. As a reminder, in early 2024, the Federal Court found that BPS Financial Pty Ltd (BPS) engaged in unlicensed conduct through issuing and providing financial advice about the Qoin Wallet product without holding a financial services licence. The Court did note that for a 10 month period, BPS was an authorised representative of PNI Financial Services Pty Ltd, and this period was not included as part of the contravening period. ASIC appealed. The Full Federal Court agreed finding that BPS could not rely on the authorised representative exemption under the Corporations Act as it was issuing Qoin Wallet on its own behalf based on evidence such as the representations in the disclosure documents. The Court found that BPS was not acting as a representative of PNI in issuing the Qoin Wallet. As a result, the Court held that, for the entire period of issuing the Qoin Wallet product, BPS was required to hold a financial services licence. Penalties are yet to be decided.
Choosi offered limited choice says ASIC
Insurance comparison website provider Choosi Pty Ltd (Choosi) is being sued by ASIC for misleading customers about its comparison services. ASIC are alleging that, in relation to its funeral and life insurance comparison services, Choosi held itself out as comparing products from a range of insurers when, in actuality, from 1 July 2019 Choosi only compared policies issued by a single insurer (with one exception), and the administrator of those products was associated with Choosi. As a result of sales of funeral and life insurance products during the contravening period, Choosi received $61 million in commissions from at least 4,225 funeral insurance policies and 9,478 life insurance policies. ASIC Deputy Chair Sarah Court stated that customers buying policies through Choosi believed that they were taking the sensible step of comparing policies “however, they were denied genuine choice” and were being encouraged to buy a funeral or life insurance policies from an insurer when a cheaper option may have been available but were not assessed. According to ASIC, while comparison sites can sometimes be useful for consumers, they should only be part of how people shop around for financial products.
ASIC sues Choosi for allegedly misleading customers through its insurance comparison service
Finger pointing for Greensill continues
Avid readers from last fortnight’s focus will recall Marsh McLennan settling a lawsuit brought by White Oak following Greensill’s collapse. Well this fortnight, Marsh has made a cross claim against UBS, the Swiss bank, for liabilities it acquired when it purchased Credit Suisse in 2023. The cross claim was filed after Marsh was named as a co-respondent in Credit Suisse’s action against IAL, under which Credit Suisse is seeking to claw back $7 billion from IAL, Greensill Bank and its administrator under insurance policies and alleging that Marsh engaged in misleading or deceptive conduct and negligence. Marsh was also sued by Greensill in March this year. To confuse the matter even more, Greensill Bank and its administrator are suing a number of insures, including BCC Trade Credit, Tokio Marine and IAL for a failure to renew an insurance policy prior to Greensill Capital’s collapse. And finally, White Oak has also filed a claim against IAL.
$7.5 million plus costs for whistleblower retaliation
TerraCom, an ASX listed coal producer, has agreed to a $7.5 million payment to resolve proceedings brought by ASIC alleging that it made misleading statements following whistleblower allegations made by a former employee regarding the falsification of coal quality results. The statements in question relate to two ASX announcements made by TerraCom and an open letter to shareholders published in national newspapers that denied the whistleblower’s allegations on the basis of independent investigations conducted. ASIC alleged that these statements were misleading and that their publication was conduct that caused detriment to the whistleblower, in the form of reputational damage, reduction of earning capacity and psychological and emotional distress. In addition to the $7.5 million penalty, TerraCom will be required to pay $1 million in ASIC’s costs. The agreement still requires approval from the Court and does not relate to ASIC’s allegations that a number of TerraCom executives failed to prevent false or misleading statements being made to ASX and breached their directors’ duties.
Class action against ex-CBA unit tossed
A class action against Count Financial (financial advisers previously a unit of CBA) on the basis that it breached the duty to act in the best interests of its clients and of the conflicted remuneration bans for advisers has been dismissed. The allegations by the lead applicant included claims that it received personal financial advice from Count’s representatives on six occasions and that Count breached its fiduciary duties when giving financial advice and contravened duties to act in the client’s best interest and ahead of its own interests. Interestingly, in dismissing the application, the Court found that the applicant only received personal advice from Count once during the relevant period and that advice related to a life insurance policy. The Court found that, in relation to this provision of advice, Count disclosed all relevant commissions payable and did not breach its duties. In relation to the duty to act in the client’s best interest, the Court did not accept that such duty imposes any obligation on an adviser to obtain the fully informed consent of a client to a conflict of interest nor imposes a positive obligation to disclose the potential conflict of interest.
Count class action dismissed in Federal Court
Compliance plan deficiencies widespread in managed investment industry
From a review of a number of responsible entities for managed investments, ASIC has uncovered that most of the entities, with a combined total of nearly $1 trillion in managed investments, do not have or maintain an appropriate compliance plan. The assessed entities manage a total of 1,471 funds and of the 50 compliance plans assessed, ASIC found that most failed to appropriately address the design and distribution obligations (DDO) regime, the internal dispute resolution requirements and the reportable situation regime’s key requirements. ASIC even noted that some plans completely failed to even address the DDO regime, which indicated that the plans had not been subjected to a proper review since 2021. ASIC expressed serious concerns stating that compliance plans “set out how responsible entities comply with the law, yet many plans we reviewed failed to adequately set out compliance with important regulatory obligations. Failing to plan is planning to fail.”
ASIC uncovers widespread compliance plan deficiencies in the managed investment industry
Key dates
- 12 June 2025 – submissions close on ASIC’s proposal to remake three legislative instruments related to advertising by product issuers, general advice warnings and Financial Services Guides.
- 13 June 2025 – consultation closes on AFCA’s rule change to expand its jurisdiction in scam complaints.
- 16 June 2025 – consultation closes on ASIC’s proposal to remake the incidental retail cover exemption legislative instrument.
- 25 June 2025 – consultation closes on ASIC’s proposal to remake basic deposit and general insurance product distribution legislative instrument.
- 27 June 2025 – submissions close for AUSTRAC’s consultation on new AML/CTF Rules.
- *1 July 2025 – APRA prudential Standard CPS 230 commences.*
In case you missed it
We are pleased to share that Matt Ellis has been recognised as finalist for Financial Services Partner of the Year and Insurance Partner of the Year by the Lawyers Weekly awards, with the winners to be announced at a black-tie gala ceremony on Thursday 12 June 2025.
