Compliance information for distributors
This section of the website provides some of the main compliance-related information to distributors that may assist with understanding your compliance obligations.
While this is not an exhaustive list of compliance-related information, it includes some of the main obligations that you may find useful. You are responsible for your own compliance requirements, so if required, you should obtain your own legal and compliance advice to ensure you meet your regulatory obligations.
Your licence, our licence and the agreement between us, requires all parties to comply with relevant law, which includes, for example, all financial services and related legislation, regulatory guides and relevant standards. The topics described herein cover some of these requirements:
What is DDO?
From 5 October 2021, all Australian Financial Service Licensees are subject to the new Design and Distribution Obligations (DDO) legislation. This places additional obligations on both issuers (insurers and trustees) and distributors of financial products.
DDO legislation is supported by ASIC Regulatory Guidance note RG274, which is intended to help consumers obtain appropriate financial products based on their needs and circumstances.
The three main actions required from the new regulations are:
- Issuers must design financial products based on the objectives and needs of the consumers for whom they’re intended;
- Issuers and distributors must take ‘reasonable steps’ that are reasonably likely to result in financial products reaching consumers in the target market defined by the issuer; and
- Issuers must monitor consumer outcomes and review products to ensure that consumers are receiving products that are likely to be consistent with their likely objectives, financial situation and needs.
What is a TMD?
A Target Market Determination (TMD) is a document that defines the characteristics of consumers who we believe the product is suitable for, based on, for example, age, residency and occupation.
There are two TMDs for on-sale products provided by NEOS – one issued by the Insurer and one issued by the Trustee. These can be found here.
What should distributors be aware of?
Distributors must be aware of the TMD applicable to NEOS products and consider the eligibility requirements and distribution conditions outlined in these TMDs. In addition, the NEOS quotation system requires each adviser to indicate if personal advice or general advice is provided to the customer for that application. We also require distributors to select the correct option for DDO reporting to be accurate.
Distributors must take reasonable steps to ensure that NEOS products are being distributed to consumers within the TMD (for general advice only). When personal advice is provided, there’s no legal requirement for these consumers to be within the eligibility requirements of the TMD, though we imagine most will be.
Distributors must report any product-related complaints to NEOS within 24 hours of receipt, and they must also confirm or report all complaints (for both general advice and personal advice business) to NEOS when requested by NEOS within 10 business days of the end of the reporting period. Failure to do so can result in penalties enforced by ASIC.
|Type of significant dealing||Short description||Process|
|Multiple significant dealings||The proportion of customers outside the TMD exceeds a threshold.||NEOS will assess the proportion of products issued to customers outside of the eligibility criteria as defined in the TMD at licensee level and monitor this against the threshold.
If this proportion exceeds the threshold, NEOS will inform the licensee, Insurer and Trustee accordingly.
|Single significant dealing||When a single dealing outside the TMD could potentially result in customer detriment||A distributor identifies an individual transaction which has resulted in or will likely result in detriment to the customer and reports this to NEOS.
The below factors may be considered by the distributor when determining whether a significant dealing has occurred:
The Insurer will also assess each complaint relating to the sales and distribution process to determine if the dealing is consistent with the TMD and consider whether there is resulting detriment to the customer.
If the Insurer determines that a significant dealing has occurred, NEOS, the licensee and Trustee will be notified accordingly.
Reporting a significant dealing
If a distributor becomes aware of a ‘significant dealing’, they must report this to NEOS within 10 business days of becoming aware. NEOS will inform the Insurer or Trustee accordingly. Please note that this applies to both general advice and personal advice business.
Details of a significant dealing can be emailed to email@example.com. Be sure to include the following information:
|Date(s) of the significant dealing||Include both:
· The date that the significant dealing occurred, or date range during which dealings occurred that taken together are significant; and
· The date the distributor became aware of the significant dealing.
|Description of the significant dealing||Describe the significant dealing, including why it’s not consistent with the TMD.|
|Why the dealing is significant||Describe why the distributor considered the dealing to be significant.|
What reporting obligations are placed on distributors?
Distributors must keep records of any product-related complaints made to them regardless of the type of advice provided (general or personal).
Distributors must send all complaints recorded (aggregated at a licensee level) to NEOS every six months by completing the DDO Complaints Reporting Template and emailing it to firstname.lastname@example.org.
The reporting period for complaints will be within 10 business days of 31 March and 30 September of each year.
Distributors may also be requested to provide an annual attestation of their compliance with the DDO obligations to NEOS upon request by NEOS and in a form to be communicated by NEOS.
Should distributors also provide DDO reports to the Insurer or Trustee?
Distributors aren’t required to report directly to the Insurer or Trustee regarding DDO Significant Dealings, DDO Complaints reporting or DDO attestations. NEOS will use the reports from distributors and submit these accordingly to the relevant issuer (Insurer or Trustee).
From 1 October 2021, all Australian Financial Service Licensees are subject to the new breach reporting legislation.
What is a reportable breach?
A breach is any non-compliance with an AFS Licence, financial services legislation, regulatory guides and codes of practice. It is then reportable to ASIC if it meets any of these points:
(a) A significant breach, or likely significant breach, of any core obligation,
(b) Any such breach above for which the investigations into whether it’s reportable or not continue for more than 30 calendar days, and again once those investigations are concluded, or
(c) Gross negligence or serious fraud.
(d) A Licensee must report to ASIC when they have reasonable grounds to believe a significant breach, or likely significant breach, of a core obligation or gross negligence or serious fraud has occurred by another Licensee, with a copy to the affected Licensee.
The legislation also states that certain breaches of core obligations are deemed to be automatically reportable.
What are the consequences for failing to report?
Failure to comply with the breach reporting legislation is now a criminal offence and significant penalties apply – except (d).
What are the expectations from the new legislation?
The legislation is designed to ensure that breaches are recognised earlier and reported faster, with subsequent remediation to customers occurring much sooner than current practice. Under the new definitions, NEOS expects more breaches to be reportable after 1 October 2021.
From 5 October 2021, all Australian Financial Service Licensees are required to adopt the updated standards and requirements for consumer complaints handling, including enforceable provisions as stipulated in RG271: Internal dispute resolution (IDR).
What is a complaint?
“[An expression] of dissatisfaction made to or about an organization, related to its products, services, staff or the handling of a complaint, where a response or resolution is explicitly or implicitly expected or legally required.” RG 271.27.
What are the key changes?
- Reduced timeframes for responding to complaints –
- Acknowledgement from 48 hours to 24 hours
- Resolution from 45 days to 30 days for Ordinary business
- 45 days for Superannuation/90 days for Super death claim complaints
- All complaints now need to be registered (even if expressed verbally)
- Includes complaints made on social media platforms owned by NEOS
- Introduction of enforceable standards and where breach may result in civil penalty proceedings by ASIC.
What should you be aware of?
- How to lodge complaints at NEOS
- How to help your customers lodge a complaint
The NEOS Complaints Policy which details how to raise a complaint and the process in which NEOS will deal with complaints, can be found here.
At NEOS, we’re committed to protecting the privacy of your client’s personal information and handling their personal information responsibly in accordance with the Commonwealth Government’s Privacy Act 1988, the Australian Privacy Principles and the Life Insurance Code of Practice (the Code), on behalf of our insurer and the trustee.
Access to Personal Information
The legislation also includes provision for people to access any stored personal information.
This means that we may be required to provide an applicant, insured person, complainant, claimant, plan owner or their legal representative, access to information stored on our files and systems.
In some instances, we may release third party medical information via your client’s medical practitioner rather than to your client or to you. This approach is taken where we deem there is a risk of misunderstanding or misinterpretation of medical information that may lead to unnecessary concern on the part of the client or undue interference with their medical management.
Medical reports may also contain information that has not yet been disclosed to your client by their doctor, where it is considered to be in the best interest of the management of their condition.
Serious harm could be caused by disclosure of this information, other than through their medical practitioner.
As a result of the Royal Commission into Financial Services, the existing anti-hawking legislation for some products and some sales practices has been extended to all financial products from 5 October 2021.
NEOS doesn’t solicit members of the public for the invitation, offer or sale of life insurance products – all our sales are generated from independent advisers who operate under their own licences.
Licensees and advisers who provide personal advice at the time of any such invitation or offer, are exempt from the anti-hawking laws.
Licensees and advisers who provide general advice are not exempt, so they will need to abide by the anti-hawking rules. If in doubt about the source of your leads, and whether that source is compliant with this legislation, we recommend you seek professional legal and compliance advice.
NEOS, together with its Insurer and Trustee, have no appetite to issue plans to any customers that may have been acquired through a breach of anti-hawking legislation.
The Code came into effect for all life insurers from 1 July 2017, you can access it here.
The Life Insurance Code of Practice (the Code) is the life insurance industry’s commitment to customer service standards. These standards help to ensure that every customer has an experience which is honest, fair and transparent.
We’re proud to say that NEOS supports and adheres to the Code on behalf of the product issuer, for all our interactions with our customers.
Whilst NEOS itself doesn’t sell life insurance products, it is a requirement of the Code that we remind those distributors who do, that pressure selling is not permitted.
The Code will be updated from time to time. In August 2021, a draft version of the Life Insurance Code of Practice 2.0 was released to the industry for comment. Once finalised, it is expected that this new version will be effective from 1 July 2022 and will contain various service expectations that are enforceable at law.
If you have any questions about a compliance matter, please contact your NEOS Business Development Manager without delay. Most issues are resolved efficiently if brought to the attention of affected parties quickly. For escalations, you may also contact the NEOS compliance department by emailing email@example.com
At NEOS, we take our compliance obligations seriously which is why we’ve strengthened our compliance team in 2021, to effectively manage the increased responsibilities now in place.