Commonwealth: Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth)

Financial Sector Reform (Hayne Royal Commission Response) Act 2020 No. 135, 2020 An Act to amend the law in relation to the financial sector, and for related purposes Contents 1 Short title 2 Commencement 3 Schedules Schedule 1—Enforceable code provisions Corporations Act 2001 National Consumer Credit Protection Act 2009 Schedule 2—Insurer avoidance of life insurance contracts, and duty to take reasonable care not to make a misrepresentation Part 1—Insurer avoidance of life insurance contracts Insurance Contracts Act 1984 Part 2—Duty to take reasonable care not to make a misrepresentation Insurance Contracts Act 1984 Schedule 3—Deferred sales model for add‑on insurance Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Schedule 4—Caps on commissions Australian Securities and Investments Commission Act 2001 National Consumer Credit Protection Act 2009 Schedule 5—Hawking of financial products Part 1—Main amendments Corporations Act 2001 Part 2—Other amendments Competition and Consumer Act 2010 Corporations Act 2001 Schedule 6—Use of terms "insurance" and "insurer" Insurance Act 1973 Schedule 7—Claims handling and settling services Corporations Act 2001 Schedule 8—Trustees of registrable superannuation entities should have no other duty Superannuation Industry (Supervision) Act 1993 Schedule 9—Adjustment of APRA and ASIC's roles in superannuation Part 1—Adjustments relating to industry supervision Superannuation Industry (Supervision) Act 1993 Part 2—Adjustments relating to financial services Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Superannuation Industry (Supervision) Act 1993 Schedule 10—Reference Checking and Information Sharing Protocol Corporations Act 2001 National Consumer Credit Protection Act 2009 National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 Schedule 11—Breach reporting and remediation Corporations Act 2001 National Consumer Credit Protection Act 2009 National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 Schedule 12—Statutory obligation to cooperate and formalising ASIC meeting procedures Part 1—Cooperation obligation Australian Prudential Regulation Authority Act 1998 Australian Securities and Investments Commission Act 2001 Part 2—Financial regulator information Australian Prudential Regulation Authority Act 1998 Australian Securities and Investments Commission Act 2001 Insurance Act 1973 Life Insurance Act 1995 Part 3—ASIC meeting procedures Australian Securities and Investments Commission Act 2001 Financial Sector Reform (Hayne Royal Commission Response) Act 2020 No. 135, 2020 An Act to amend the law in relation to the financial sector, and for related purposes [Assented to 17 December 2020] The Parliament of Australia enacts: 1 Short title This Act is the Financial Sector Reform (Hayne Royal Commission Response) Act 2020. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provisions Commencement Date/Details 1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table The day this Act receives the Royal Assent. 17 December 2020 2. Schedule 1 The later of: 1 January 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 January 2021. 3. Schedule 2, Part 1 The later of: 1 January 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 January 2021. 4. Schedule 2, Part 2 Immediately after the commencement of the provisions covered by table item 3. 1 January 2021 5. Schedule 3 Immediately after the commencement of the provisions covered by table item 7. 5 October 2021 6. Schedule 4 The later of: 1 January 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 January 2021. 7. Schedule 5 The later of: 5 October 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 5 October 2021. 8. Schedules 6 and 7 The later of: 1 January 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 January 2021. 9. Schedule 8 The later of: 1 July 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 July 2021. 10. Schedule 9 The later of: 1 January 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 January 2021. 11. Schedules 10 and 11 1 October 2021. 1 October 2021 12. Schedule 12 The later of: 1 January 2021 (a) the day after this Act receives the Royal Assent; and (paragraph (b) applies) (b) 1 January 2021. Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act. (2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act. 3 Schedules Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Enforceable code provisions Corporations Act 2001 1 Section 9 Insert: approved code of conduct means a code of conduct approved by ASIC by legislative instrument under section 1101A, and includes a replacement code of conduct approved under that section. code of conduct means a code of conduct that relates to any aspect of the activities of: (a) financial services licensees; or (b) authorised representatives of financial services licensees; or (c) issuers of financial products; being activities in relation to which ASIC has a regulatory responsibility. enforceable code provision means a provision of an approved code of conduct identified by ASIC under subsection 1101A(2). mandatory code of conduct means a code of conduct that is declared by regulations under section 1101AE to be mandatory. subscriber, in relation to an approved code of conduct: (a) means a person or entity that agrees, in a way required by the applicant for the code's approval, to be bound by the code; and (b) if a person or entity no longer agrees to be bound by the code—includes the person or entity during the period that the person or entity did agree to be so bound. 2 Division 2 of Part 7.12 (heading) Repeal the heading, substitute: Division 2—Codes of conduct 3 After Division 2 of Part 7.12 (heading) Insert: Subdivision A—Approved codes of conduct 4 Section 1101A Repeal the section, substitute: 1101A Approved codes of conduct Applications (1) If an application is made to approve a code of conduct, ASIC may, by legislative instrument, approve the code of conduct. Identifying enforceable code provisions (2) In the approval, ASIC may identify a provision of the code of conduct as an enforceable code provision if ASIC considers that: (a) the provision represents a commitment to a person by a subscriber to the code relating to transactions or dealings performed for, on behalf of or in relation to the person; and (b) a breach of the provision is likely to result in significant and direct detriment to the person; and (c) additional criteria prescribed by the regulations for the purposes of this paragraph (if any) are satisfied; and (d) it is appropriate to identify the provision of the code as an enforceable code provision, having regard to the matters prescribed by the regulations for the purposes of this paragraph (if any). Note: See also section 1101AD. ASIC to be satisfied of certain matters before making approval (3) ASIC must not approve a code of conduct unless it is satisfied that: (a) to the extent that the code is inconsistent with this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities—the code imposes an obligation on a subscriber that is more onerous than that imposed by this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities; and (b) each enforceable code provision: (i) has been agreed with the applicant; and (ii) is legally effective; and (c) it is appropriate to approve the code, having regard to the following matters: (i) whether the obligations of subscribers to the code are capable of being enforced; (ii) whether the applicant has effective administrative systems for monitoring compliance with the code and making information obtained as a result of monitoring publicly available; (iii) whether the applicant has effective administrative systems for maintaining, and making publicly available, an accurate list of subscribers to the code. Revocation (4) ASIC may, by legislative instrument, revoke an approval of an approved code of conduct: (a) on application by the applicant for the approval; or (b) if ASIC ceases to be satisfied of the matters mentioned in subsection (3); or (c) if a review of the operation of the code is not completed by the applicant within the timeframe required by section 1101AB. (5) Subsection (4) does not, by implication, limit the application of subsection 33(3) of the Acts Interpretation Act 1901. 1101AA Variations to approved codes of conduct (1) If an application is made to vary an approved code of conduct, ASIC may, by legislative instrument, approve the variation. (2) Subsections 1101A(2) and (3) apply in relation to an application under subsection (1) as if it were an application to approve a code of conduct. 1101AB Review of approved codes of conduct (1) The applicant, in relation to an approved code of conduct, must ensure that, every 5 years, an independent review is undertaken of the operation of the approved code of conduct. (2) A review under subsection (1) must make provision for public consultation. (3) A review of an approved code of conduct must be completed: (a) for the first review—before the end of the 5 year period beginning on the day the code of conduct was approved; and (b) for a subsequent review—within 5 years after the completion of the previous review. (4) For the purposes of this section, a review is completed when a report of the review is given to ASIC. (5) Within 10 business days of completing a review, the applicant must publish the report of the review on its website. 1101AC Obligation to comply with enforceable code provisions If a person holds out that they comply with an approved code of conduct, the person must not breach an enforceable code provision of the approved code of conduct. Civil penalty: 300 penalty units. 1101AD Regulations The regulations may: (a) prescribe criteria of which ASIC must be satisfied before it identifies a provision of a code of conduct as an enforceable code provision; or (b) prescribe matters to which ASIC must have regard before it identifies a provision of a code of conduct as an enforceable code provision. Subdivision B—Mandatory codes of conduct 1101AE Mandatory codes of conduct (1) The regulations may prescribe a code of conduct for the purposes of this Division and declare it to be a mandatory code of conduct. (2) Regulations declaring a code of conduct a mandatory code of conduct may also: (a) confer functions and powers on a person or body for the purposes of: (i) monitoring compliance with the code of conduct; and (ii) dealing with disputes or complaints arising under, or in relation to, the code of conduct; and (iii) dealing with other associated administrative matters; or (b) provide for and in relation to: (i) the keeping of records by persons bound by the code of conduct; and (ii) reporting obligations of such persons. (3) If regulations prescribe a code of conduct, the code of conduct may prescribe pecuniary penalties not exceeding 1,000 penalty units for civil penalty provisions of the code of conduct. (4) To avoid doubt, subsections 1317G(3) and (4) do not apply in relation to the contravention of a civil penalty provision of a mandatory code of conduct. 1101AF Obligation to comply with mandatory code of conduct A person must not contravene a mandatory code of conduct. Division 3—Other matters 5 Paragraph 1317C(ge) After "section 1101A", insert "or 1101AA". 6 At the end of section 1317DAN Add: ; (e) civil penalty provisions of an approved code of conduct; (f) civil penalty provisions of a mandatory code of conduct. 7 In the appropriate position in subsection 1317E(3) Insert: section 1101AC failure to comply with an enforceable code provision financial services a provision of a regulation made under section 1101AD that includes the words "civil penalty" and one or more amounts in penalty units at the foot of the provision failure to comply with a civil penalty provision of a mandatory code of conduct financial services 8 In the appropriate position in Chapter 10 Insert: Part 10.45—Transitional provisions relating to the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 1672 Transitional—Banking Code of Practice (1) The following provisions have effect: (a) the Banking Code of Practice, whose approval by ASIC was registered on the Federal Register of Legislation on 18 December 2019, is taken to be approved under section 1101A, as substituted by Schedule 1 to the Financial Sector Reform (Hayne Royal Commission Response) Act 2020; (b) Division 2 of Part 7.12, as inserted by that Schedule to that Act, applies to the Banking Code of Practice. (2) In this section: Banking Code of Practice means the Banking Code of Practice, published on 12 December 2019 by the Australian Banking Association Incorporated (ABN 60 117 262 978). Note: The Banking Code of Practice could in 2020 be viewed on the Australian Banking Association's website (http://www.ausbanking.org.au). National Consumer Credit Protection Act 2009 9 Subsection 5(1) Insert: approved code of conduct means a code of conduct approved by ASIC by legislative instrument under section 238A, and includes a replacement code of conduct approved under that section. code of conduct means a code of conduct that relates to any aspect of the activities of: (a) licensees; or (b) credit representatives; being activities in relation to which ASIC has a regulatory responsibility. enforceable code provision means a provision of an approved code of conduct identified by ASIC under subsection 238A(2). mandatory code of conduct means a code of conduct that is declared by regulations under section 238F to be mandatory. subscriber, in relation to an approved code of conduct: (a) means a person or entity that agrees, in a way required by the applicant for the code's approval, to be bound by the code; and (b) if a person or entity no longer agrees to be bound by the code—includes the person or entity during the period that the person or entity did agree to be so bound. 10 Before Division 2 of Part 5‑5 Insert: Division 1A—Codes of conduct Subdivision A—Approved codes of conduct 238A Approved codes of conduct Applications (1) If an application is made to approve a code of conduct, ASIC may, by legislative instrument, approve the code of conduct. Identifying enforceable code provisions (2) In the approval, ASIC may identify a provision of the code of conduct as an enforceable code provision if ASIC considers that: (a) the provision represents a commitment to a person by a subscriber to the code relating to transactions or dealings performed for, on behalf of or in relation to the person; and (b) a breach of the provision is likely to result in significant and direct detriment to the person; and (c) additional criteria prescribed by the regulations for the purposes of this paragraph (if any) are satisfied; and (d) it is appropriate to identify the provision of the code as an enforceable code provision, having regard to the matters prescribed by the regulations for the purposes of this paragraph (if any). Note: See also section 238E. ASIC to be satisfied of certain matters before making approval (3) ASIC must not approve a code of conduct unless it is satisfied that: (a) to the extent that the code is inconsistent with this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities—the code imposes an obligation on a subscriber that is more onerous than that imposed by this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities; and (b) each enforceable code provision: (i) has been agreed with the applicant; and (ii) is legally effective; and (c) it is appropriate to approve the code, having regard to the following matters: (i) whether the obligations of subscribers to the code are capable of being enforced; (ii) whether the applicant has effective administrative systems for monitoring compliance with the code and making information obtained as a result of monitoring publicly available; (iii) whether the applicant has effective administrative systems for maintaining, and making publicly available, an accurate list of subscribers to the code. Revocation (4) ASIC may, by legislative instrument, revoke an approval of an approved code of conduct: (a) on application by the applicant for the approval; or (b) if ASIC ceases to be satisfied of the matters mentioned in subsection (3); or (c) if a review of the operation of the code is not completed by the applicant within the timeframe required by section 238C. (5) Subsection (4) does not, by implication, limit the application of subsection 33(3) of the Acts Interpretation Act 1901. 238B Variations to approved codes of conduct (1) If an application is made to vary an approved code of conduct, ASIC may, by legislative instrument, approve the variation. (2) Subsections 238A(2) and (3) apply in relation to an application under subsection (1) as if it were an application to approve a code of conduct. 238C Review of approved codes of conduct (1) The applicant, in relation to an approved code of conduct, must ensure that, every 5 years, an independent review is undertaken of the operation of the approved code of conduct. (2) A review under subsection (1) must make provision for public consultation. (3) A review of an approved code of conduct must be completed: (a) for the first review—before the end of the 5 year period beginning on the day the code of conduct was approved; and (b) for a subsequent review—within 5 years after the completion of the previous review. (4) For the purposes of this section, a review is completed when a report of the review is given to ASIC. (5) Within 10 business days of completing a review, the applicant must publish the report of the review on its website. 238D Obligation to comply with enforceable code provisions If a person holds out that they comply with an approved code of conduct, the person must not breach an enforceable code provision of the approved code of conduct. Civil penalty: 300 penalty units. 238E Regulations The regulations may: (a) prescribe criteria of which ASIC must be satisfied before it identifies a provision of a code of conduct as an enforceable code provision; or (b) prescribe matters to which ASIC must have regard before it identifies a provision of a code of conduct as an enforceable code provision. Subdivision B—Mandatory codes of conduct 238F Mandatory codes of conduct (1) The regulations may prescribe a code of conduct for the purposes of this Division and declare it to be a mandatory code of conduct. (2) Regulations declaring a code of conduct a mandatory code of conduct may also: (a) confer functions and powers on a person or body for the purposes of: (i) monitoring compliance with the code of conduct; and (ii) dealing with disputes or complaints arising under, or in relation to, the code of conduct; and (iii) dealing with other associated administrative matters; or (b) provide for and in relation to: (i) the keeping of records by persons bound by the code of conduct; and (ii) reporting obligations of such persons. (3) If regulations prescribe a code of conduct, the code of conduct may prescribe pecuniary penalties not exceeding 1,000 penalty units for civil penalty provisions of the code of conduct. (4) To avoid doubt, subsections 167B(1) and (2) do not apply in relation to the contravention of a civil penalty provision of a mandatory code of conduct. 238G Obligation to comply with mandatory code of conduct A person must not contravene a mandatory code of conduct. 11 Section 241 Repeal the section. 12 After paragraph 288K(1)(c) Insert: (ca) civil penalty provisions of an approved code of conduct; (cb) civil penalty provisions of a mandatory code of conduct; 13 Paragraph 327(1)(c) Omit "section 241", substitute "section 238A or 238B". Schedule 2—Insurer avoidance of life insurance contracts, and duty to take reasonable care not to make a misrepresentation Part 1—Insurer avoidance of life insurance contracts Insurance Contracts Act 1984 1 Subsection 29(3) Repeal the subsection, substitute: (3) If: (a) the failure was not fraudulent or the misrepresentation was not made fraudulently; and (b) the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms, if the duty of disclosure had been complied with or the misrepresentation had not been made; the insurer may, within 3 years after the contract was entered into, avoid the contract. 2 Application (1) The amendments made by this Part apply to a contract of life insurance that is originally entered into after the commencement of this item. (2) If: (a) a contract of life insurance that was originally entered into before the commencement of this item is varied after that commencement to: (i) increase a sum insured under the contract in respect of one or more of the life insureds; or (ii) provide one or more additional kinds of insurance cover; and (b) the variation was not an automatic variation but was required to be expressly agreed between the insurer and the insured before the contract was varied; then: (c) the contract is treated, to the extent of the variation, as if it had been originally entered into after the commencement of this item; and (d) the amendments made by this Schedule apply to the contract to the extent of the variation. Part 2—Duty to take reasonable care not to make a misrepresentation Insurance Contracts Act 1984 3 Subsection 11(1) Insert: consumer insurance contract has the meaning given by section 11AB. duty to take reasonable care not to make a misrepresentation means the duty referred to in section 20B. relevant failure, in relation to a contract of insurance, has the meaning given by section 27AA. 4 At the end of Part I Add: 11AB Consumer insurance contracts (1) For the purposes of this Act, a contract of insurance is a consumer insurance contract if the insurance is obtained wholly or predominantly for the personal, domestic or household purposes of the insured. (2) A contract of insurance is also a consumer insurance contract if: (a) it is for new business; and (b) the insurer, before the contract is entered into, gives the insured a written notice stating that the contract is a consumer insurance contract. (3) If it is alleged in a proceeding in relation to a contract of insurance that the contract is a consumer insurance contract, it is presumed that the contract is a consumer insurance contract unless the contrary is established. 5 Section 12 Omit all the words after "a duty other", substitute: than: (a) in relation to a consumer insurance contract or proposed consumer insurance contract—the duty to take reasonable care not to make a misrepresentation; or (b) in relation to any other contract of insurance or proposed contract of insurance—the duty of disclosure. 6 Before Division 1 of Part IV Insert: Division 1A—Consumer insurance contracts: insured's duty to take reasonable care not to make a misrepresentation 20A Application of this Division This Division applies in relation to: (a) consumer insurance contracts; and (b) proposed contracts of insurance that, if entered into, would be consumer insurance contracts. 20B The insured's duty to take reasonable care not to make a misrepresentation (1) Subject to this Act, an insured has a duty to take reasonable care not to make a misrepresentation to the insurer before the relevant contract of insurance is entered into. (2) Whether or not an insured has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances. (3) Without limiting subsection (2), the following matters may be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation: (a) the type of consumer insurance contract in question, and its target market; (b) explanatory material or publicity produced or authorised by the insurer; (c) how clear, and how specific, any questions asked by the insurer of the insured were; (d) how clearly the insurer communicated to the insured the importance of answering those questions and the possible consequences of failing to do so; (e) whether or not an agent was acting for the insured; (f) whether the contract was a new contract or was being renewed, extended, varied or reinstated. (4) Any particular characteristics or circumstances of the insured of which the insurer was aware, or ought reasonably to have been aware, are to be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation. (5) The insured is not to be taken to have made a misrepresentation merely because the insured: (a) failed to answer a question; or (b) gave an obviously incomplete or irrelevant answer to a question. (6) To avoid doubt, a misrepresentation made fraudulently is made in breach of the duty to take reasonable care not to make a misrepresentation. 20C Warranties of existing facts to be representations A statement with respect to the existence of a state of affairs that is: (a) made in or in connection with a contract of insurance; and (b) made by or attributable to the insured; does not have effect as a warranty but has effect as though it were a statement made to the insurer by the insured during the negotiations for the contract but before it was entered into. 7 Division 1 of Part IV (heading) Repeal the heading, substitute: Division 1—Other contracts: insured's duty of disclosure 8 Before section 21 Insert: 20E Application of this Division This Division applies in relation to: (a) contracts of insurance that are not consumer insurance contracts; and (b) proposed contracts of insurance that, if entered into, would not be consumer insurance contracts. 9 Sections 21A and 21B Repeal the sections. 10 Paragraph 22(1)(b) Repeal the paragraph. 11 Paragraph 22(1)(c) Omit "section 31A", substitute "subsection 27AA(2)". 12 Division 2 of Part IV (heading) Repeal the heading, substitute: Division 2—Other contracts: misrepresentations by insured 13 Before section 23 Insert: 23A Application of this Division This Division applies in relation to: (a) contracts of insurance that are not consumer insurance contracts; and (b) proposed contracts of insurance that, if entered into, would not be consumer insurance contracts. 14 Division 3 of Part IV (heading) Repeal the heading, substitute: Division 3—Remedies for relevant failures 15 Before section 27A Insert: 27AA Meaning of relevant failure (1) In this Act, a relevant failure in relation to a contract of insurance is: (a) if the contract is, or would be, a consumer insurance contract—a misrepresentation made by the insured in breach of the duty to take reasonable care not to make a misrepresentation; or (b) otherwise: (i) a failure by the insured to comply with the duty of disclosure; or (ii) a misrepresentation made by the insured to the insurer before the contract was entered into. (2) Without limiting subsection (1), if, in relation to a contract of life insurance under which a person other than the insured would become a life insured: (a) the life insured made a misrepresentation during the negotiations for the contract but before it was entered into; and (b) the misrepresentation would have been a breach of the duty to take reasonable care not to make a misrepresentation if that duty had applied to the life insured in relation to the contract; then the misrepresentation is a relevant failure in relation to the contract (whether or not the contract is a consumer insurance contract). 16 Subsection 28(1) Repeal the subsection, substitute: (1) This section applies if a relevant failure occurs in relation to a contract of general insurance, but does not apply if the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the failure had not occurred. 17 Subsection 28(2) Omit "the failure was fraudulent or the misrepresentation was made fraudulently", substitute "the relevant failure was fraudulent". 18 Subsection 28(3) Omit "the failure had not occurred or the misrepresentation had not been made", substitute "the relevant failure had not occurred". 19 Subsection 29(1) Repeal the subsection (not including the note), substitute: Scope (1) This section applies if a relevant failure occurs in relation to a contract of life insurance, but does not apply if: (a) the insurer would have entered into the contract even if the failure had not occurred; or (b) the failure was in respect of the date of birth of one or more of the life insureds. 20 Subsection 29(2) Omit "the failure was fraudulent or the misrepresentation was made fraudulently", substitute "the relevant failure was fraudulent". 21 Paragraph 29(3)(a) Omit "failure was not fraudulent or the misrepresentation was not made fraudulently", substitute "relevant failure was not fraudulent". 22 Paragraph 29(3)(b) Omit "duty of disclosure had been complied with or the misrepresentation had not been made", substitute "relevant failure had not occurred". 23 Subsection 29(4) (definition of Q) Omit "the duty of disclosure had been complied with or the misrepresentation had not been made", substitute "the relevant failure had not occurred". 24 Subsection 29(6) Omit "the duty of disclosure had been complied with or the misrepresentation had not been made", substitute "the relevant failure had not occurred". 25 Paragraph 29(7)(b) Omit "no failure to comply with the duty of disclosure, and no misrepresentation, by the insureds under the similar contracts before they were entered into", substitute "no relevant failure in relation to the similar contracts". 26 Subsection 31(1) Omit "failure to comply with the duty of disclosure or fraudulent misrepresentation", substitute "relevant failure". 27 Subsection 31(2) Omit "failure or misrepresentation", substitute "relevant failure". 28 Section 31A Repeal the section. 29 Section 32 (heading) Omit "Non‑disclosure or misrepresentation", substitute "Relevant failure". 30 Subsection 32(1) Omit "failure to comply with the duty of disclosure, or a misrepresentation was made to the insurer,", substitute "relevant failure". 31 Subsection 32(2) Omit "failure to comply with the duty of disclosure, or the misrepresentation,", substitute "relevant failure". 32 Subsection 32(2) Omit "or misrepresentation". 33 Section 32A (heading) Omit "Non‑disclosure or misrepresentation", substitute "Relevant failure". 34 Section 32A Omit "failure to comply with the duty of disclosure, or a misrepresentation was made to the insurer,", substitute "relevant failure". 35 At the end of paragraph 60(1)(a) Add "or". 36 Paragraphs 60(1)(b) and (c) Repeal the paragraphs, substitute: (b) there was a relevant failure; or 37 Application of amendments (1) The amendments made by this Part apply to contracts of insurance, other than contracts of life insurance, that are entered into on or after 5 October 2021. (2) Subject to subitem (3), the amendments made by this Part apply to contracts of life insurance that are entered into on or after 5 October 2021 (not including contracts of life insurance entered into before that day and extended, varied or reinstated on or after that day as mentioned in paragraph 11(9)(a) or (c) of the Insurance Contracts Act 1984). (3) If: (a) subitem (2) does not apply to a contract of life insurance; and (b) on or after 5 October 2021, the contract is varied to: (i) increase a sum insured under the contract in respect of one or more of the life insureds; or (ii) provide one or more additional kinds of insurance cover; and (c) the variation was not an automatic variation but was required to be expressly agreed between the insurer and the insured before the contract was varied; then: (d) the contract is treated, to the extent of the variation, as if it had been entered into on or after 5 October 2021; and (e) the amendments made by this Part apply to the contract to the extent of the variation. (4) Despite anything else in this item, the amendments made by this Part apply, on and after the commencement of this item, to a contract of insurance that is entered into on or after that commencement if the insurer gives the insured written notice before the contract is entered into that the contract is a consumer insurance contract. Schedule 3—Deferred sales model for add‑on insurance Australian Securities and Investments Commission Act 2001 1 Subsection 12BA(1) Insert: add‑on insurance deferral period has the meaning given by section 12DP. add‑on insurance pre‑deferral period has the meaning given by section 12DP. add‑on insurance product, in relation to a product or service, has the meaning given by section 12DO. 2 After Subdivision D of Division 2 of Part 2 Insert: Subdivision DA—Deferred sales for add‑on insurance products 12DO Meaning of add‑on insurance product (1) An add‑on insurance product, in relation to another product or service (the principal product or service), is a financial product that: (a) is offered or sold to a consumer (the customer) in connection with the customer acquiring, or entering into a commitment to acquire, the principal product or service; and (b) is offered or sold by: (i) the provider of the principal product or service; or (ii) another person, in accordance with an arrangement to which the provider of the principal product or service is a party; and (c) manages financial risk (within the meaning of section 12BAA) relating to the principal product or service; and (d) either: (i) is a contract of insurance; or (ii) provides for the customer to benefit from a contract of insurance to which the provider of the financial product is a party. (2) For the purposes of subsection (1), contract of insurance includes: (a) a contract that would ordinarily be regarded as a contract of insurance even if some of its provisions are not by way of insurance; and (b) a contract that includes provisions of insurance in so far as those provisions are concerned, even if the contract would not ordinarily be regarded as a contract of insurance. (3) The regulations may provide that a customer is, for the purposes of this Subdivision, taken to have entered into a commitment to acquire a product or service of a specified class at a time specified in the regulations. 12DP Meaning of add‑on insurance deferral period and add‑on insurance pre‑deferral period (1) If a person (the customer) who acquires, or enters into a commitment to acquire, a product or service (the principal product or service) is given the information determined under paragraph (4)(a), in the form and manner determined under paragraph (4)(b), in connection with the acquisition or proposed acquisition, then: (a) there is an add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service; and (b) the add‑on insurance deferral period is the period beginning at the later of: (i) the time the customer enters into the commitment (or, if the customer acquires the principal product or service without previously entering into a commitment to do so, the time the customer acquires the principal product or service); and (ii) the time the customer is given the information; and ending at the end of 4 days after the day on which the period begins. (2) If the information determined under paragraph (4)(a) is not given in the form and manner determined under paragraph (4)(b) in connection with the acquisition or proposed acquisition, there is no add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service. Note: There is no obligation for a person who provides a product or service to give the information to a customer. However, if the information is not given and there is no add‑on insurance deferral period, certain conduct relating to the sale or offer of add‑on insurance products may be prohibited (see sections 12DQ to 12DR). (3) The add‑on insurance pre‑deferral period in relation to the principal product or service is a period that: (a) begins when the customer indicates an intention to acquire the principal product or service; and (b) if there is an add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service—ends immediately before the start of that period; and (c) if there is no such add‑on insurance deferral period—does not end. (4) ASIC may, by legislative instrument, determine the following: (a) information to be given for the purposes of subsection (1); (b) the form and manner in which the information is to be given (which may require the information to be given to a particular customer each time the customer enters into a commitment to acquire, or acquires, the products or services). (5) Information determined under paragraph (4)(a): (a) must include information that relates to a customer giving notice that the customer does not want to receive: (i) offers of add‑on insurance products; or (ii) requests or invitations for the customer to ask or apply for add‑on insurance products; in relation to the principal product or service; and (b) may include information relating to any other matter that ASIC thinks appropriate. 12DQ Prohibition on selling add‑on insurance products before end of add‑on insurance deferral period etc. Contraventions by provider of principal product or service (1) A person (the first person) contravenes this subsection if: (a) another person (the customer) acquires, or enters into a commitment to acquire, a product or service (the principal product or service) from the first person; and (b) the first person also sells a financial product to the customer; and (c) the financial product is an add‑on insurance product in relation to the principal product or service. Note: Failure to comply with this subsection is an offence (see section 12GB). (2) A person (the first person) contravenes this subsection if: (a) another person (the customer) acquires, or enters into a commitment to acquire, a product or service (the principal product or service) from the first person; and (b) a third person sells the customer a financial product that is an add‑on insurance product in relation to the principal product or service. Note: Failure to comply with this subsection is an offence (see section 12GB). Exception for sale after add‑on insurance deferral period (3) Subsections (1) and (2) do not apply if: (a) there is an add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service; and (b) the add‑on insurance product is sold to the customer after the end of the add‑on insurance deferral period. Note: A defendant bears an evidential burden in relation to the matter in subsection (3): see subsection 13.3(3) of the Criminal Code. Contravention by third party provider (4) A person (the third party provider) contravenes this subsection if: (a) the third party provider sells a financial product to a consumer (the customer); and (b) the financial product is an add‑on insurance product in relation to a product or service (the principal product or service) offered or provided by another person; and (c) either: (i) there is no add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service; or (ii) there is such an add‑on insurance deferral period, and the third party provider sells the add‑on insurance product to the customer before the end of the period. Note: Failure to comply with this subsection is an offence (see section 12GB). Timing of sale (5) For the purposes of this section, an add‑on insurance product is taken to be sold to a customer no later than the first time at which no further action from the customer is required for the sale to occur (even if the sale does not occur until a later time). 12DR Prohibition on offering add‑on insurance product during add‑on insurance deferral period Offer by provider of principal product or service (1) A person (the principal provider) contravenes this subsection if: (a) another person (the customer) acquires, or enters into a commitment to acquire, a product or service (the principal product or service) from the principal provider; and (b) the principal provider offers a financial product for issue or sale to the customer, or requests or invites the customer to ask or apply for a financial product or to purchase a financial product; and (c) the financial product is an add‑on insurance product in relation to the principal product or service; and (d) the offer, request or invitation is made otherwise than in writing. Note: Failure to comply with this subsection is an offence (see section 12GB). Exceptions for subsection (1)—offer made outside add‑on insurance deferral period (2) Subsection (1) does not apply if the offer, request or invitation is made: (a) during the add‑on insurance pre‑deferral period in relation to the principal product or service; or (b) if there is an add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service—after the end of the period of 6 weeks beginning on the first day of the add‑on insurance deferral period. Note: A defendant bears an evidential burden in relation to the matter in subsection (2): see subsection 13.3(3) of the Criminal Code. Offer by third party provider (3) A person (the third party provider) contravenes this subsection if: (a) another person (the customer) acquires, or enters into a commitment to acquire, a product or service (the principal product or service); and (b) the third party provider offers a financial product for issue or sale to the customer, or requests or invites the customer to ask or apply for a financial product or to purchase a financial product; and (c) the financial product is an add‑on insurance product in relation to the principal product or service; and (d) the offer, request or invitation is made otherwise than in writing; and (e) there is an add‑on insurance deferral period in relation to the customer acquiring, or entering into a commitment to acquire, the principal product or service; and (f) the offer, request or invitation is made during the period of 6 weeks beginning on the first day of the add‑on insurance deferral period. Note: Failure to comply with this subsection is an offence (see section 12GB). Exception for subsections (1) and (3)—contact initiated by customer (4) Subsections (1) and (3) do not apply if: (a) the offer, request or invitation is made in response to contact initiated by the customer; and (b) either: (i) the offer, request or invitation is made after the end of the add‑on insurance deferral period; or (ii) the offer, request or invitation relates only to the purpose for which the customer initiated the contact. Note: A defendant bears an evidential burden in relation to the matter in subsection (4): see subsection 13.3(3) of the Criminal Code. 12DS Prohibition on offering add‑on insurance product—customer opt‑out (1) A person (the first person) contravenes this subsection if: (a) another person (the customer) acquires, or enters into a commitment to acquire, a product or service (the principal product or service); and (b) the first person offers a financial product for issue or sale to the customer, or requests or invites the customer to ask or apply for a financial product or to purchase a financial product; and (c) the financial product is an add‑on insurance product in relation to the principal product or service; and (d) before the offer, request or invitation is made, the customer informs the first person that the customer does not want to receive such offers, requests or invitations. Note: Failure to comply with this subsection is an offence (see section 12GB). (2) A person (the first person) contravenes this subsection if: (a) another person (the customer) acquires, or enters into a commitment to acquire, a product or service (the principal product or service); and (b) the first person offers a financial product for issue or sale to the customer, or requests or invites the customer to ask or apply for a financial product or to purchase a financial product; and (c) the financial product is an add‑on insurance product in relation to the principal product or service; and (d) before the offer, request or invitation is made, the customer informs any of the following that the customer does not want to receive such offers, requests or invitations: (i) the person who provided the principal product or service (if that person is not the first person); (ii) any person (other than the first person) with whom the person mentioned in subparagraph (i) has an arrangement of a kind mentioned in subparagraph 12DO(1)(b)(ii). 12DT Right of return and refund for add‑on insurance product sold in contravention of section 12DQ (1) If a person (the first person) contravenes a subsection of section 12DQ in relation to an add‑on insurance product sold (whether by the first person or by any other person) to another person (the customer), the customer has a right of return and refund exercisable at any time during the period starting when the product was sold and ending: (a) if, under section 1019B of the Corporations Act 2001, the customer has a right to return the product within a particular period—1 month after the end of that period; or (b) otherwise—1 month and 14 days after the product was sold. (2) If the add‑on insurance product is returned under subsection (1): (a) if the product is constituted by a legal relationship between the customer and any other person—by force of this section, that relationship is terminated, with effect from the time of the return, without penalty to the customer; and (b) by force of this section, any contract for the acquisition of the product by the customer is terminated, with effect from the time of the return, without penalty to the customer. (3) The amount of a refund paid under subsection (1) in relation to an add‑on insurance product: (a) must be the entire amount paid for the product; but (b) may be reduced by any amount paid as a result of a claim under the product. (4) This section applies in addition to any other penalties for or in relation to contraventions of section 12DQ. 12DU Exception for financial advisers Section 12DQ does not apply in relation to the sale of an add‑on insurance product, and sections 12DR and 12DS do not apply in relation to an offer to issue or sell an add‑on insurance product, or a request or invitation to ask or apply for an add‑on insurance product, by a person if: (a) the person sells the add‑on insurance product, or makes the offer, request or invitation, in the course of providing personal advice (within the meaning of Chapter 7 of the Corporations Act 2001) in circumstances where Division 2 (best interests obligations) of Part 7.7A of that Act applies; and (b) the add‑on insurance product relates to a principal product or service that is provided by the person, and that the person recommends in the course of providing the advice. Note: A defendant bears an evidential burden in relation to the matter in this section: see subsection 13.3(3) of the Criminal Code. 12DV Exception for product covered by product intervention order (1) Section 12DQ does not apply in relation to the sale of an add‑on insurance product by a person if a product intervention order in force under Part 7.9A of the Corporations Act 2001: (a) covers that sale; and (b) provides for a period during which the product must not be sold. Note: A defendant bears an evidential burden in relation to the matter in subsection (1): see subsection 13.3(3) of the Criminal Code. (2) Sections 12DR and 12DS do not apply in relation to: (a) an offer to issue or sell; or (b) a request or invitation to ask or apply for; an add‑on insurance product that would, if offered to a consumer, be covered by a product intervention order in force under Part 7.9A of the Corporations Act 2001 that provides for a period during which the product must not be sold to the consumer. Note: A defendant bears an evidential burden in relation to the matter in subsection (2): see subsection 13.3(3) of the Criminal Code. 12DW Exception for comprehensive motor vehicle insurance (1) Section 12DQ does not apply in relation to the sale of an add‑on insurance product by a person if the add‑on insurance product provides insurance cover: (a) to an individual who: (i) wholly or partly owns a motor vehicle; or (ii) has the use of a motor vehicle under a lease of at least 4 months' duration; and (b) in respect of all of the following (whether or not the product also provides insurance cover in respect of other matters): (i) loss of, or damage to, the motor vehicle resulting from an accident; (ii) loss of, or damage to, property of another person resulting from an accident in which the motor vehicle is involved; (iii) loss of, or damage to, the motor vehicle caused by fire, theft or malicious acts. Note: A defendant bears an evidential burden in relation to the matter in subsection (1): see subsection 13.3(3) of the Criminal Code. (2) Sections 12DR and 12DS do not apply in relation to an offer to issue or sell an add‑on insurance product described in subsection (1) of this section, or a request or invitation to ask or apply for such an add‑on insurance product. Note: A defendant bears an evidential burden in relation to the matter in subsection (2): see subsection 13.3(3) of the Criminal Code. (3) In this section: motor vehicle means a motor‑powered vehicle that: (a) is designed to travel by road; and (b) is designed to carry passengers, or is a motorcycle; and (c) does not have a carrying capacity that exceeds 2 tonnes. 12DX Exemption by regulations Regulations may exempt a class of products (1) The regulations may exempt a class of add‑on insurance products from sections 12DQ, 12DR and 12DS. Conditions on exemptions (2) An exemption under subsection (1) may be subject to conditions specified in the regulations. Note: A person who contravenes a condition may commit an offence (see section 12DZA). 12DY Exemption by ASIC (1) ASIC may, by notifiable instrument, exempt from sections 12DQ, 12DR and 12DS: (a) an add‑on insurance product sold by a specified person; or (b) a class of add‑on insurance products sold by a specified person. Note: For review of a decision to refuse to make an exemption under subsection (1), or to vary or revoke such an exemption, see section 244. (2) In considering whether to make an exemption under subsection (1), ASIC must have regard to the following: (a) any evidence as to whether the add‑on insurance product, or the class of add‑on insurance products, has historically been good value for money; (b) whether, without an exemption, there is a high risk of underinsurance or non‑insurance; (c) any evidence as to whether the add‑on insurance product, or the class of add‑on insurance products, is well understood by consumers; (d) any differences between the add‑on insurance product, or add‑on insurance products in the class, and financial products of a similar kind that are not sold as add‑on insurance products; (e) any other matters that ASIC considers relevant. Conditions on exemptions (3) An exemption under subsection (1) may be subject to conditions specified in the exemption. Note 1: A person who contravenes a condition may commit an offence (see section 12DZA). Note 2: For review of a decision to impose or vary a condition on an exemption under subsection (1), see section 244. 12DZ Effect of exemption (1) Section 12DQ does not apply in relation to the sale of an add‑on insurance product by a person if an exemption under subsection 12DX(1) or 12DY(1) applies to the add‑on insurance product. Note: A defendant bears an evidential burden in relation to the matter in subsection (1): see subsection 13.3(3) of the Criminal Code. (2) Sections 12DR and 12DS do not apply in relation to an offer to issue or sell an add‑on insurance product, or a request or invitation to ask or apply for an add‑on insurance product, if an exemption under subsection 12DX(1) or 12DY(1) applies to the add‑on insurance product. Note: A defendant bears an evidential burden in relation to the matter in subsection (2): see subsection 13.3(3) of the Criminal Code. Product intervention orders (3) Subsections (1) and (2) do not apply to an add‑on insurance product if: (a) a product intervention order is in force under Part 7.9A of the Corporations Act 2001 in relation to the product; and (b) the product intervention order provides for a period during which the product must not be sold. 12DZA Contravention of conditions on exemption (1) A person who: (a) sells or offers to sell an add‑on insurance product, if an exemption under section 12DX or 12DY applies to the product; or (b) sells a product or service, if: (i) there is an arrangement between the person and another person that relates to the provision by the other person of add‑on insurance products in relation to that kind of product or service; and (ii) an exemption under section 12DX or 12DY applies to any of those add‑on insurance products; or (c) offers an add‑on insurance product for issue or sale to a consumer, or requests or invites a consumer to ask or apply for an add‑on insurance product or to purchase an add‑on insurance product, where an exemption under section 12DX or 12DY applies to the add‑on insurance product; must not contravene a condition of the exemption. Note: Failure to comply with this subsection is an offence (see section 12GB). Product intervention orders (2) Subsection (1) does not apply to an add‑on insurance product if: (a) a product intervention order is in force under Part 7.9A of the Corporations Act 2001 in relation to the product; and (b) the product intervention order provides for a period during which the product must not be sold. 3 Subsections 12AE(1) and (3) After "Subdivision D (sections 12DA to 12DN)", insert ", Subdivision DA (sections 12DO to 12DZA)". 4 Section 12GB (at the end of the heading) Add "or DA". 5 Subsections 12GB(1), (1A) and (1B) Omit "other than section 12DA", substitute ", other than section 12DA, or a provision of Subdivision DA". 6 Paragraphs 12GB(2)(a) and (3)(a) After "Subdivision D (sections 12DA to 12DN)", insert "or Subdivision DA (sections 12DO to 12DZA)". 7 Subsection 12GB(4) After "Subdivision D (sections 12DA to 12DN)", insert "or Subdivision DA (sections 12DO to 12DZA)". 8 After paragraph 12GBA(6)(b) Insert: (ba) a provision of Subdivision DA; 9 After subsection 12GBCN(3) Insert: (3A) Despite subsection (1), in proceedings referred to in that subsection: (a) in relation to a contravention by a person of subsection 12DQ(4), it is necessary to prove that the person was reckless as to the matters in paragraph 12DQ(4)(c); and (b) in relation to a contravention by a person of subsection 12DR(3), it is necessary to prove that the person was reckless as to the matters in paragraphs 12DR(3)(e) and (f); and (c) in relation to a contravention by a person of subsection 12DS(2), it is necessary to prove that the person was reckless as to the matters in paragraph 12DS(2)(d). (3B) For the purposes of subsection (3A), a person is reckless as to a fact if: (a) the person is aware of a substantial risk that the fact exists; and (b) having regard to the circumstances known to the person, it is unjustifiable to take the risk. 10 Subsection 12GF(1) Omit "or Subdivision D (sections 12DA to 12DN)", substitute ", Subdivision D (sections 12DA to 12DN) or Subdivision DA (sections 12DO to 12DZA)". 11 Subsections 12GI(1) and (4) After "Subdivision D (sections 12DA to 12DN)", insert "or Subdivision DA (sections 12DO to 12DZA)". 12 Subsection 12GI(4) After "amount to a contravention of a provision of Subdivision D", insert "or DA". 13 Subsection 12GLA(4) (after paragraph (b) of the definition of contravening conduct) Insert: (ba) contravenes a provision of Subdivision DA (sections 12DO to 12DZA); or 14 Paragraph 12GN(1)(c) After "Subdivision D (sections 12DA to 12DN)", insert "or Subdivision DA (sections 12DO to 12DZA)". 15 After paragraph 12GXA(b) Insert: (ba) a provision of Subdivision DA; 16 Subsection 12GXB(2) (table item 1, column headed "If the infringement notice is for an alleged contravention of ...") Omit "Subdivision C or D (other than section 12DA or 12DE, subsection 12DG(1) or section 12DI or 12DM)", substitute "Subdivision C, D (other than section 12DA or 12DE, subsection 12DG(1) or section 12DI or 12DM) or DA". 17 At the end of subsection 244(2) Add: ; or (d) to refuse to make an exemption under subsection 12DY(1); or (e) to vary or revoke an exemption under subsection 12DY(1); or (f) to impose or vary a condition on an exemption under subsection 12DY(1). 18 In the appropriate position Insert: Part 31—Application and transitional provisions relating to Schedule 3 to the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 329 Application—deferred sales model for add‑on insurance (1) The amendments made by Schedule 3 to the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 apply in relation to a principal product or service (within the meaning of section 12DO) if: (a) a person enters into a commitment to acquire the principal product or service on or after the commencement of that Schedule; or (b) a person acquires the principal product or service on or after the commencement of that Schedule without previously having entered into such a commitment. (2) Regulations made for the purposes of subsection 12DO(3) apply for the purposes of this section. Corporations Act 2001 19 Section 9 Insert: add‑on insurance product has the same meaning as in section 12DO of the Australian Securities and Investments Commission Act 2001. 20 After paragraph 992A(2)(a) Insert: (b) an offer of, or a request or invitation relating to, a financial product that is an add‑on insurance product in relation to a product or service (the principal product or service) that the consumer has indicated an intention to acquire from: (i) the person making the offer, request or invitation; or (ii) another person with whom that person has an arrangement that relates to the provision of add‑on insurance products in relation to products or services that include the principal product or service; or 21 At the end of subsection 992A(2) Add: Note 2: Subdivision DA of Division 2 of Part 2 of the Australian Securities and Investments Commission Act 2001 deals with offers, requests or invitations relating to add‑on insurance products. 22 After subsection 992A(2) Insert: (3) However, paragraph (2)(b) does not apply if: (a) making the offer, request or invitation is covered by any of sections 12DU to 12DY of the Australian Securities and Investments Commission Act 2001; or (b) the offer, request or invitation is made after the end of the period of 6 weeks beginning on the end of the first day of: (i) the add‑on insurance deferral period (within the meaning of section 12DP of that Act) in relation to the consumer acquiring, or entering into a commitment to acquire, the principal product or service; or (ii) if there is no such add‑on insurance deferral period—the add‑on insurance pre‑deferral period (within the meaning of that section). Schedule 4—Caps on commissions Australian Securities and Investments Commission Act 2001 1 Subsection 12AC(2) After "section 12GF", insert "or 12GFA". 2 Subsection 12BA(1) Insert: add‑on risk product has the meaning given by subsection 12DMC(2). Australian Consumer Law means Schedule 2 to the Competition and Consumer Act 2010 as applied under Subdivision A of Division 2 of Part XI of that Act. commission includes: (a) any financial or other benefit in the nature of a commission; and (b) in relation to an add‑on risk product provided to a person in conne