ASIC grants relief for business insurance with retail component

Insurers and brokers who offer retail cover as part of bundled commercial insurance contracts have been granted temporary regulatory relief exempting them from certain retail client obligations as set out in the Corporations Act, the corporate regulator announced today.

The Australian Securities and Investments Commission (ASIC) says the legislative instrument it created to provide the three-year relief – ASIC Corporations (Incidental Retail cover) Instrument 2022/716 – clarifies obligations for bundled business insurance that includes a non-commercial component.

Bundled business insurance contracts provide several types of cover that, while predominantly wholesale, may also provide cover defined as retail under the Corporations Act.

ASIC says incidental retail cover refers to retail insurance cover provided to a business that forms a minor, incidental and inseparable part of an otherwise wholesale insurance product.

The regulator says an example of incidental retail insurance is cover for the loss or damage of personal effects within wholesale business property insurance products that benefit a business’s employees.

“ASIC granted relief to reduce regulatory burden and provide certainty for industry that the retail client obligations do not apply to what are, in reality, business insurance products,” the corporate regulator says.

“This prevents compliance costs arising from the retail client obligations from being incurred and passed on to businesses.”

ASIC says the relief includes several conditions to ensure it is appropriately targeted and that the retail covers are genuinely incidental to, and inseparable from, the wholesale insurance product. For example, when a retail cover is offered as an optional extra, when the business client makes a separate decision to purchase it or pays an additional fee, the relief will not apply.

The regulator received an application from an insurer seeking retail client obligations relief and consulted with various industry, consumer and government stakeholders before deciding to grant the exemption.

ASIC says the three-year relief commenced today but it will review the operation of the instrument before it expires.