Efforts to change the Australian financial landscape has the Australian Securities and Investment Commission (ASIC) learn from the errors of UK’s banking scandal, PPI mis selling, and the measures undertaken by the FCA.
The Financial Conduct Authority uses theories of behavioural economics. ASIC intends to use these, including temporary product intervention powers. The FCA used the latter power to ensure that PPI selling follows ethical guidelines, specifically understanding the nature of the insurance’s limitations, to stop the mis selling of the insurance policy.
PPI and other add-on insurance products are sold with a primary product. UK banks have told consumers that these add-ons are required to take out financing.
Similar to the UK’s crisis, products in Australian have received many complaints from consumers. Some complaints mirror those of being sold an insurance policy consumers did not need.
According to ASIC Head Peter Kell, add-on insurance is not the consumer’s focus at the time of purchase. He said that the consumers had extensive information about their financial product, but not the add-on product. This is why regulation of these add-on products, and necessary intervention will be needed, to ensure that aggressive sales tactics are offset by informative sales.
Meanwhile, the UK PPI scandal has gained more than £1.5 additional compensation from banks. This has brought the total PPI compensation bill to more than £23 billion.