Need to know
- On 29 June the Australian Securities and Investments Commission issued 38 stop orders covering 67 PetSure insurance products, including those sold by Woolworths, RSPCA, Petbarn, Guide Dogs, Medibank, Bupa and HCF
- The regulator was concerned that Petsure hadn’t properly considered its customers’ financial situations, a potential violation of its design and delivery obligations
- One issue is that the pet insurance brands in question require policyholders to pay for their pets’ medical care upfront before lodging a claim
In a groundbreaking move, the Australian Securities and Investments Commission (ASIC) imposed stop orders last week that temporarily prevented the sale of 67 pet insurance products issued by PetSure and its owner Hollard insurance, whose brands comprise about 80% of the pet insurance market in Australia.
The 38 stop orders put the sale of the pet insurance products – from brands including Woolworths, RSPCA, Petbarn, Guide Dogs, Medibank, Bupa and HCF – on hold, though PetSure quickly took steps to address ASIC's concerns and have the orders lifted.
ASIC says the orders were issued to "protect consumers from acquiring pet insurance products that may not be consistent with their objectives, financial situation or needs".
Improper design and distribution
ASIC's concern was that Hollard and PetSure had potentially contravened part of their design and distribution obligations (DDOs), which require businesses to design financial products in a way that meets the needs of their target customers.
To comply with their DDOs, financial firms must create a publicly available target market determination (TMD) document that describes the types of customers its products would be appropriate for.
ASIC's concern was that Hollard and PetSure had potentially contravened their obligation to design financial products in a way that meets the needs of their target customers
ASIC said it had found 'deficiencies' in Hollard and PetSure TMDs covering the 67 products, in particular their failure to sufficiently take the financial situation of potential customers into account.
The documents "did not appear to properly consider whether the key terms, features and attributes of the products would be consistent with the objectives, financial situation and needs of consumers in the target market," ASIC said.
Pay first, claim later
ASIC flagged the fact that the insurance products required policyholders to pay for the medical treatment of their pets upfront, and then file a claim for partial reimbursement from the insurer – a requirement that could come as a surprise to policyholders who haven't read every word of the respective product disclosure statements.
ASIC flagged the fact that the insurance products required policyholders to pay for the medical treatment of their pets upfront
Having to pay upfront is just one issue customers have with pet insurance products. CHOICE has heard from a number of pet insurance customers whose policies have become increasingly unaffordable as their pets age and the premiums go up.
In February this year, the owner of a 14-year-old Pomchi told us that "after a decade of almost no claims, on a 13-year held policy, and paying well over $6000 plus in premiums, the stinkers bung on loadings and excesses for age, knowing full well that one can't shift insurance providers. Worse, terminating the policy leaves one high and dry and they know that too."
First stop order case for TMDs
The pet insurance stop orders were the first time ASIC had used such powers against deficient TMDs. PetSure took swift action to address the issues.
"PetSure can confirm, after consultation with ASIC, that we have addressed the concerns raised with the target market determination and subsequently, the interim stop order has been lifted," a PetSure spokesperson told CHOICE on the same day the orders were issued.
Target market determinations are an important part of ensuring products are only sold to customers who can afford the serviceCHOICE head of policy Patrick Veyret
How many customers bought a PetSure product that was inappropriate for their financial circumstances before the ASIC intervention is unclear.
"Target market determinations are an important part of ensuring products are only sold to customers who can afford the service, and it's disappointing that so many pet insurers have failed in this regard," says CHOICE head of policy Patrick Veyret.
"These insurers must make sure their products are only sold to customers who can afford them, rather than emotionally manipulating people's love for their pets and selling them insurance that will result in financial distress."
Stock images: Getty, unless otherwise stated.