Advertising General Insurance products & services

I'm often asked by clients to review website and marketing material, from a compliance (not legal) perspective.

ASIC Regulatory Guide 234 has been developed as a good practice guidance to help insurers, underwriting agencies, brokers, TPA's and other licensees (and authorised representatives) to comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct.

Good Practice Guidance (RG 234)

Features, benefits and risks

Advertisements for general insurance products should give a balanced message about the features, benefits & risks associated with the product. Advertisements should not overstate the potential benefits (e.g. policy coverage) or create unrealistic expectations by giving undue prominence to the benefits compared with the risks (such as exclusions).

Warnings, disclaimers, qualifications and fine print

ASIC recognise that an advertisement will not always include in its headline claim all information about the product that is relevant to the consumer’s decision. However, the more that a qualification is required to balance the information contained in the headline claim, the more prominently placed the qualification should be. The headline claim must not itself be misleading.

If warnings, disclaimers and qualifications are required, they should not be inconsistent with other content in the advertisement, including any headline claims. They should also have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing of the advertisement.

Statements referring the consumer to another website or webpage, or a document such as a PDS, will not be sufficient to correct a misleading or deceptive headline claim: see Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254.

Fees and costs

Where a fee or cost is referred to in an advertisement, it should give a realistic impression of the overall level of fees and costs a consumer is likely to pay. When a headline claim about a fee or cost is used in an advertisement, any exclusions or qualifications should be contained within the headline claim or be clearly and prominently noted within the advertisement.

Comparisons

When comparing products in an advertisement, the products should have sufficiently similar features to make the comparison relevant and not misleading. Where only one particular feature of a product is highlighted, a comparison may be misleading if it ignores other key features

Ratings

The impression of the product created by the rating should accurately reflect the rating. The rating used in an advertisement should be properly explained either in the advertisement itself or by including details of where a consumer can obtain further information about the meaning of the rating and the rating scale

Awards

Where awards received are included in an advertisement for a product, the grantor of the award should be clearly identified and the award explained including the currency of the award. An advertisement should make it clear if an award is granted by someone related to the promoter.

Use of certain terms and phrases

Care should be taken when using certain terms and phrases in an advertisement, particularly where the way those terms and phrases are used is not consistent with the ordinary meaning commonly recognised by consumers (e.g. ‘free’, ‘secure’ and ‘guaranteed’)

Technical language and industry jargon

Industry concepts or jargon may not be well understood by many consumers and should be avoided unless the advertisement is unlikely to be seen by any consumers outside a defined group and the promoter can be confident that those consumers are familiar with the subject matter. It should not be assumed that consumers will understand concepts used within a particular industry or even understand the products themselves

Use of certain terminology

Advertisements must not use certain terminology where usage of that terminology is restricted by law. For example, the Corporations Act restricts the use of certain terminology in certain situations, including:

(a) the terms ‘independent’, ‘impartial’ or ‘unbiased’ in circumstances where a person (or the person’s employer) receives a commission, volume bonus, or other benefit that may reasonably be expected to influence the person (s923A); and

(b) the terms ‘insurance broker’, ‘general insurance broker’, and insurance broking, in circumstances where a person is not authorised by conditions on an AFS licence to use those terms (s923B).

The Insurance Act 1973 (Insurance Act) also restricts the use of certain terminology, including in certain circumstances in which a person carries on a business or is proposing to carry on a business and the person uses:

(a) the term ‘insurance’ to describe a product or service that is not insurance but in all the circumstances could be mistakenly believed to be insurance (s114(1), Insurance Act); or

(b) the term ‘insurer’ to describe a person that supplies a product or service and;

(i) the product or service is not insurance but in all the circumstances could be mistakenly believed to be insurance; or

(ii) the person is not authorised or registered to carry on an insurance business under relevant legislation (s114(2)–(3), Insurance Act)

Endorsements and testimonials

Advertising should not falsely represent that a product or product issuer has an endorsement or approval that it does not actually have. Testimonials from individuals should be attributed to them and should be authentic.

Target audience

Promoters should consider the characteristics of the actual audience that is likely to see the advertisement (e.g. their financial literacy, knowledge, demographics) and whether the advertisement provides adequate information for that audience.

Consistency with disclosure documents

Where an advertisement draws attention to specific features of a product, statements in advertisements should be consistent with the features of the advertised product and the disclosures in any corresponding disclosure documents (e.g. a PDS or FSG)

Photographs, diagrams, images and examples

Images in advertising (e.g. in print and television advertising) can create a particularly significant impression on consumers, potentially more significant than that created by written or spoken messages.

If the effect of an image is to contradict, detract from or reduce the prominence of qualifying statements, this may make the advertisement more likely to mislead.