Susan McDonald (Queensland, National Party) Share this | Hansard source

I rise to speak in support of the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019. There are a number of things that we do after forming government and in being part of this place, but I think there is nothing more important than providing Australians with the confidence that the systems that they operate in are effective and fair.

I know that the decision to hold the financial services royal commission was debated widely, and I want to commend former senators Wacka Williams and Barry O'Sullivan and other Nationals for the part they played in ensuring that this royal commission went ahead, because this is a very serious topic, particularly for regional Australians.

Some of the matters that have come out around insurance in regional Australia could not be more topical than they are right now. Last year, we saw the floods in the north and north-west of Queensland, and we have seen bushfires and other events most regularly in my home state of Queensland that mean that consumers often have the unfortunate and unhappy experience of discovering that, although they thought they were well insured and covered, that is not the case. That is a very, very serious issue, because insurance right across Australia is becoming increasingly expensive. I hear stories about it being more and more difficult to insure individuals, businesses and homes. Sometimes they are self-insuring, meaning they are not insuring at all, but often they cannot get insurance. The most shocking part is that there are businesses, strata title units and other residences, particularly in North Queensland, that cannot get insurance at all. This is a very difficult situation, given that banks and financial institutions require these assets to be insured. So this royal commission was very important and I'm very pleased to speak to the response and protecting consumers bill.

Life can be full of much drama, and it is, but there is nothing quite so difficult as financial headwinds. This is why the Morrison government is acting to give added peace of mind to millions of hardworking people who want to know that they are getting what they paid for.

The Insurance Contracts Act will be amended to allow the ASIC Act unfair contracts law to apply to insurance. I am especially happy to commend this act because, as I've already touched on, the cost of insurance in my home region of North Queensland is prohibitive, forcing people to underinsure or forgo insurance altogether. There are businesses in North Queensland who remain completely uninsured. These are in some cases well-known and high-profile businesses, but they run the risk of not being paid out in the event of a claim and are setting money aside for those events that we know will come again, particularly in North Queensland and particularly cyclones and flood events.

The Insurance Contracts Act will offer protection to consumers who lack bargaining power when they receive their contracts on a take-it-or-leave-it basis. These consumers are very vulnerable to unfair terms like exclusions or onerous conditions which can be hidden in the contract. This will provide important protection in cases where an insurer has attempted to deny a claim or restrict the payout available to a consumer or a small business on the basis of an unfair term.

For insurance contracts, the regime will be tailored to increase clarity and certainty for industry and consumers. This includes defining the up-front price as premiums and excess or deductibles payable, and defining the main subject matter of the contract as what is being insured. This is in line with the royal commission's recommendation 4.7. Consumers and ASIC will be able to apply to the court for a declaration that a term of an insurance contract is unfair, and if they succeed that term will be void.

Schedule 2 of this bill deals with funeral expenses. For anyone who has gone through the tragic and terribly sad time of losing a close family member, it is shocking to find that this is potentially a time when they will have the double impact of an unfortunate experience with their funeral expenses. The financial services royal commission uncovered evidence of the significant harm caused to vulnerable consumers by the poor sales practices adopted by funeral expenses policy providers. A funeral expenses policy or facility involves the payment of a premium over a period of time to insure against the event of a funeral. It differs from insurance in that the payout may only be used to meet the costs of the funeral and those things incidental to it.

The funeral expenses exemption in the Corporations Regulations 2001 excludes funeral expenses policies from being a financial product under the Corporations Act 2001. This means that providers of funeral expenses policies are not regulated under the Australian financial services legal framework. The exemption has allowed these providers to escape the scrutiny of the Australian Securities and Investments Commission. As part of its response to recommendation 4.2 of the royal commission's final report, the government has committed to removing the exclusion of funeral expenses policies from the definition of 'financial product' in the Corporations Regulations 2001 and put beyond doubt that the consumer protection provision of the Australian Securities and Investments Commission Act 2001 do apply to funeral expenses policies.

The government is acting on the evidence presented by the financial services royal commission that many Indigenous people living in regional and remote communities are being misled and pressured into funeral expenses policies. This bill will ensure that the consumer protection provisions in the ASIC Act apply to funeral expenses policies, clarifying any ambiguity that may exist on this matter. The removal of this exemption will ensure that consumers have appropriate protections when taking out policies to help fund the costs associated with funerals.

The provision of prepaid funerals will be unaffected by these reforms on the grounds that they will be able to rely on the funeral benefit exemption in the Corporations Act. This bill will come into effect after royal assent, and providers of funeral expenses policies that do not already hold an Australian Financial Services licence will be required to gain a licence by 1 April 2020.

Schedule 3 of the bill deals with mortgage brokers and fulfils the government's commitment to implement its response to two recommendations from the royal commission into misconduct in the banking, superannuation and financial services industry royal commission. The bill will introduce a best interests duty for mortgage brokers and reform mortgage broker remuneration. The best interests duty will require mortgage brokers to act in the best interests of consumers when providing credit assistance in relation to credit contracts. This obligation will bring the law into line with what consumers currently expect of mortgage brokers. The bill and regulations may change as to mortgage broker remuneration by requiring the value of up-front commissions to be linked to the amount drawn down by borrowers instead of the loan amount; banning campaign and volume based commissions and payments; and capping soft dollar benefits. The new rules will also limit the period over which commissions can be clawed back from aggregators and brokers to two years, and prohibit the cost of clawback from being passed on to consumers.

The royal commission identified evidence of mortgage brokers recommending loans based on the commissions that they would receive. Both the best interests duty and reforms to mortgage broker remuneration will mitigate the incentive for mortgage brokers to suggest loans not in the best interests of the consumer.

I wish to speak, though, to the mortgage brokers across the nation who work diligently and work hard to ensure that their customers are being kept up to date with the best and most suitable product for them, particularly in their home loans and other assets that they hold. The mortgage brokers are able to more easily compare and contrast the different products that are available from financial institutions. I have mortgage brokers in my town of Townsville that I know do a terrific job of contacting their customers on an annual basis to review the product that they had recommended the previous year and to ensure that their customers were receiving the best product and the most suitable product for them. I want to commend those people who provide a very necessary financial service to those in the community who may not have the time or the expertise to compare various products and ensure they get the best product for them.

This government is helping people to gain confidence during some of the most difficult times in their lives—that is, when they've lost a loved one or need to make an insurance claim—and to particularly deal with it quickly after disaster strikes.

It is a shocking situation that in North Queensland, and particularly in Townsville, there remain so many homes that have not yet been repaired following the floods, because of the methodology used by panel building appointments. One local builder I spoke to only last week has been given the job of repairing only six homes in Townsville when there remain so very many that have not yet been touched. So there is still much work to be done in the insurance industry. I'm very sure that this government will continue to provide support to consumers to ensure that there are better outcomes. These recommendations also help protect consumers from unfairly getting into financial situations which can have harrowing and lifelong consequences. I commend this bill to the House.