ASIC has issued an interim stop order on Clearview Life Assurance Limited’s (Clearview Life) Clearview ClearChoice Income Protection Cover and Accidental Income Protection Cover (Income Protection Cover). The stop order relates to two underlying products.

ASIC issued the stop order because of deficiencies in the target market determination (TMD). This follows ASIC’s recent interim stop orders related to pet insurance products under the Design and Distribution Obligations (DDO) (see 23-174MR). ASIC is considering further stop orders for other insurance products.

The interim orders prohibit Clearview Life from engaging in retail product distribution and providing general advice in respect of the product for new customers. The orders are valid for 21 days unless revoked earlier. 

ASIC made the interim stop order in relation to Clearview Life’s Income Protection Cover to protect consumers from acquiring life insurance that may not be consistent with their objectives, financial situation or needs. 

ASIC was concerned that the TMD failed to consider the impact of key eligibility criteria (i.e. age and minimum employment criteria) on the suitability of the product for certain classes of consumers. As a result, ASIC was concerned that the target market contained classes of consumers for whom the product was not likely to be appropriate.

ASIC is also concerned that the TMD does not specify any meaningful distribution conditions to ensure that the Income Protection Cover would likely be distributed to consumers in the target market and likely exclude distribution to consumers in the negative target market.

ASIC expects Clearview Life to consider the concerns raised regarding the TMD and take immediate steps to ensure compliance. ASIC will consider making a final order if the concerns are not addressed in a timely manner. Clearview Life will have an opportunity to make submissions before a decision is made about any final stop orders.

ASIC’s now 39 interim stop orders in relation to insurance products follows ASIC’s risk-based and targeted review of insurance TMDs. ASIC’s review covered over 100 TMDs for general and life insurance products. ASIC has also written to the Insurance Council of Australia, the Council of Australian Life Insurers and the Financial Services Council to outline the review’s findings and how TMDs can be improved. ASIC expects all general and life insurers to consider our findings and areas for improvement, and to update their TMDs and distribution arrangements accordingly.

Background

Clearview Life is a life insurer that offers Life and Accidental Death Cover, Total and Permanent Disability Cover, Income Protection Cover, Trauma Cover and Child Cover.

DDO requires firms to design financial products that meet the needs of consumers, and to distribute those products in a more targeted manner. A TMD is an important requirement under DDO. It is a mandatory public document that sets out the class of consumers a financial product is likely to be appropriate for (the target market) and matters relevant to the product’s distribution and review.

ASIC expects insurers to meet the ‘appropriateness requirements’ for their TMD (RG 274.64). A TMD needs to: 

• describe (all three of) the likely objectives, financial situation and needs of the consumers in the target market,  
• describe the product, including its key attributes, and 
• explain why the product is likely to be consistent with the objectives, financial situation and needs of those consumers in the target market (see RG 274.68). 

ASIC’s review of insurance TMDs was an initial exercise and ASIC has further targeted surveillances underway to check whether product issuers and distributors are complying with DDO. Where firms are not doing the right thing, ASIC can take quick action under DDO to disrupt poor conduct and prevent potential consumer harm. 

To date, ASIC has issued 81 interim stop orders under DDO, including the stop order for Clearview Life. Of these, 74 interim stop orders have been lifted following actions taken by the entities to address ASIC’s concerns (including where 8 products were withdrawn). Seven stop orders remain in place. 

ASIC’s Moneysmart website has information for consumers on life insurance. 

Editor's note:

Following the interim stop order, ClearView Life addressed ASIC’s concerns by amending their TMD. The amended TMD now includes the income protection cover key eligibility criteria (i.e., age, employment and income requirements). The TMD has also been amended to include distribution conditions with objective and tangible parameters intended to ensure that the income protection cover would likely be distributed within the target market. Further, ClearView Life has also amended the TMDs of their other products, namely Combined ClearView ClearChoice and ClearChoice Super. On 21 July 2023, ASIC revoked the interim stop order on the income protection cover and no final stop orders were made.