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13-249MR ASIC welcomes improved pet insurance disclosure
ASIC has today reported on improvements made to disclosure in pet insurance product disclosure statements (PDSs) in response to concerns raised by ASIC as part of a targeted industry-wide review.
ASIC conducted this review following the identification of a number of issues from its own reports of misconduct and from a Choice review of pet insurance which that was published in late 2011 (Creature Comforts, Choice Magazine, October 2011). ASIC also identified a significant increase in disputes received by the Financial Ombudsman Service Limited (FOS) about pet insurance during 2012 and 2013.
ASIC’s review identified concerns about disclosure in some pet insurance PDSs and promotional online material including:
Insufficient or confusing disclosure about policy limits, pre-existing conditions (including conditions that consumers are likely to consider unusual or unexpected) and policy exclusions. For example:
some of the PDSs did not make it clear that they exclude cover for diseases for which there is a known vaccine, even if the pet has been vaccinated but still contracts the disease
some of the PDSs did not make it clear that pet insurance generally excludes cover for pre-existing conditions that occurred prior to the purchase of pet insurance, even if the pre-existing condition last resulted in symptoms or treatment many years beforehand, and
some of the PDSs and some of the online material (such as online quotes) did not clearly state the limits to the amount of cover provided per year and/or per illness or accident. These limits can range from $500 to $20,000 per year or per condition (typically these are between $8,000 and $12,000 per year or per condition).
Insufficient disclosure or non-disclosure of the need for consumers to make co-payments and pay excesses in the event of a claim. Our review found that excess amounts can be up to $500, and co-payment amounts (where the insured is liable to cover some of the costs of the claim) can be up to 35%. For some policies, co-payments may be required for the life of the policy. Other policies may require co-payments to be made when a pet reaches a certain age. In addition, some policies require the payment of excesses as well as co-payments when a claim is made.
The use of worked examples of benefit amounts and other promotional material conflicting with or not accurately reflective of the policy.
Representations comparing pet insurance to health insurance (which is a different type of insurance product with different features of cover).
After ASIC raised these concerns with the relevant pet insurers and distributors, they agreed to address the issues by improving disclosure in the PDSs and promotional materials, including websites.
Greg Kirk, ASIC’s Senior Executive Leader, Deposit Takers Credit and Insurers, said: ‘Owning a pet can be expensive, and pet insurance can help manage that expense by covering veterinary costs. It is important, however, that consumers clearly understand what is and what is not covered by a policy, so that they can weigh up whether it is worth buying.
'We will continue to monitor PDSs issued across all industry sectors using a risk-based approach to determine whether disclosure to consumers can be improved.’
Pet insurance is insurance which is designed to cover the cost of veterinary expenses arising from accident or illness in a pet (usually a dog or cat). Some pet insurance policies also provide cover for additional features such as routine care (eg, vaccinations) and pet boarding costs where the owner of the pet is hospitalised.
Pet insurance can be purchased on its own, and some home insurance policies also provide optional limited pet insurance coverage for an additional cost.
Under the Corporations Act 2001, an insurer needs to provide a number of disclosure documents to consumers who purchase a pet insurance policy, including a PDS. ASIC has issued Regulatory Guide 168 Disclosure: Product Disclosure Statements (and other disclosure requirements) (RG 168) which contains Good Disclosure Principles to help product issuers comply with the disclosure requirements and also promote good disclosure outcomes for consumers.
Regulatory Guide 234 Advertising financial products and services (including credit): Good practice guidance (RG 234) provides guidance in relation to the promotion and advertising of financial products, including the need for advertisements to be consistent with information in any corresponding disclosure documents (such as a PDS).
ASIC has also published specific information and guidance for consumers about the purchase of pet insurance on its MoneySmart website.