ASIC (Information under the Deferred Sales Model for Add-On Insurance) Instrument 2021/632

The instrument relies on a number of defined terms from the Act. Add-on insurance deferral period means the period defined in s 12DP(1) of the Act, generally a waiting period during which an add-on insurance product cannot be sold in connection with a principal product or service. The prescribed information must be given to trigger the start of that period. Customer has the same meaning as in s 12DP(1) , likely the person who acquires or is about to acquire the principal product or service. Principal product or service is defined by reference to the same subsection; it is the main product (e.g., a car, home loan, or consumer good) to which the add-on insurance is attached. Opt-out mechanism is defined as the way or ways by which a customer can inform any person referred to in s 12DS of the Act that they do not wish to receive offers of add-on insurance products, or requests or invitations to ask or apply for add-on insurance products, in relation to a principal product or service. The instrument does not create new opt-out rights; it merely requires the prescribed information to include the details of the mechanism that already exists.

The concept of electronic communication is imported from the Electronic Transactions Act 1999, taking the paragraph (a) definition: it includes communication by means of guided and/or unguided electromagnetic energy, but specifically excludes voice-only communications (that definition is narrower than some other definitions). This matters because a telephone call would not satisfy the electronic communication method under this instrument; only text-based electronic communications (email, SMS, in-app message) that can display the prescribed format and allow ongoing access would qualify. The instrument requires that the electronic communication allow the customer to have “convenient and ongoing access” to the prescribed information throughout the six-week add-on insurance deferral period. “Convenient and ongoing” is not further defined, creating uncertainty. A link that expires after 24 hours would not comply; an email that the customer can keep and re-read would likely comply, but an SMS that the customer might delete would be questionable.

Another key concept is WCAG 2.0 at Level AA as it applies to Guideline 1.4. That guideline covers contrast, text spacing, and resizing. The instrument does not require full WCAG compliance for the entire communication, only that the prescribed information is displayed in a format that complies with Guideline 1.4. That is a narrow accessibility requirement, but it imposes a technical obligation on sellers to ensure the font, colours, and layout meet specific contrast ratios and resizing capabilities. The hard copy version has no equivalent accessibility requirement beyond being on a white A4 page.

The opt-out mechanism concept is central. The prescribed information includes a sentence that must identify the opt-out mechanism for the specific add-on insurance product (e.g., “by calling 1800 XXX” or “by replying STOP to this message”). Additionally, the information must provide the principal product or service provider’s contact details as a second opt-out channel for all add-on insurance. This means the seller must have a functioning opt-out mechanism already in place before using the prescribed information; the instrument cannot be used as a substitute for creating one.

Finally, the instrument distinguishes between the two schedules: the electronic version includes a table format with contact details side by side, while the hard copy version uses a bulleted list. The hard copy version also includes a tick-box option for the customer to opt out by returning the form. That physical return mechanism might be impractical for many customers, but it is mandatory to include if the hard copy is used. The instrument does not require the seller to accept the tick-box opt-out; it only requires the information to be present. However, if a customer ticks the box and returns the form, the seller would need to process that as a valid opt-out under s 12DS.

The instrument directly affects any person who gives information about an add-on insurance product in relation to a principal product or service, as defined in the Act. This includes motor vehicle dealers, car finance brokers, home loan lenders, consumer credit providers, retailers selling extended warranties, and any intermediary that sells or distributes add-on insurance at the point of sale of a main product. The instrument applies regardless of whether the seller is the insurer or a third-party distributor. Because the prescribed information must be given “after” the customer commits to the principal product, the timing requirement particularly affects businesses that sell add-on insurance immediately after a consumer signs for a car or loan , they must now wait to give the information and cannot close the add-on insurance sale at the same moment.

Customers are the recipients of the prescribed information, but the instrument does not impose duties on them. However, customers are affected by the content of the information: they are told they can say no, that there is a four-day wait, and that they can opt out of further contact. The “consider your situation” prompts may influence customer behaviour, though the prompts are framed as questions rather than advice.

The instrument also affects compliance officers, legal teams, and system designers within financial services entities. They must ensure that the software or processes that generate the prescribed information use the exact text, sequence, and format. For electronic communications, they must ensure WCAG 2.0 Guideline 1.4 compliance at Level AA, which may require font, contrast, and responsive design adjustments. They must also design the delivery mechanism so that the customer has “convenient and ongoing access” for six weeks , this may rule out certain messaging platforms that delete messages after a period.

In-person sales environments are specifically affected by the requirement in s 6(2). If the customer interacts in person (e.g., at a dealership), the seller must offer a hard copy during that interaction if the customer wants one, and provide it immediately if elected. This imposes an additional step in the sales process. The exception for products sold purely electronically (e.g., online-only insurance) means that in-person offer requirement can be avoided if the insurance’s terms and conditions state that all disclosures and communications will be only by electronic communication.

Small businesses that sell add-on insurance as a sideline (e.g., a small used car lot) may find the compliance burden disproportionate. They may not have the IT infrastructure to generate the prescribed information automatically or to ensure WCAG compliance. They may also struggle to maintain the opt-out mechanism for six weeks. The instrument does not provide any concession for small businesses; it applies to all persons giving the prescribed information, regardless of size or turnover.

Finally, ASIC is indirectly affected as it must enforce compliance with the instrument. The instrument was made by an ASIC delegate under s 12DP(4), so ASIC is the rule-maker and enforcer. ASIC also operates the Moneysmart website referenced in the prescribed text; the instrument effectively requires sellers to direct customers to a government website for further information.

The instrument imposes duties on the person giving the prescribed information (the seller or distributor). The primary duty is to give the prescribed information in the correct form, at the correct time, and by the correct method. The duty is strict: the information must be exactly as set out in the schedules, with no additions, deletions, or rearrangements. The only variables are the placeholders for names, contact details, and opt-out mechanism. The seller has no discretion to add a logo, promotional message, or disclaimer. The subject line for electronic communications is mandatory: “You can say no to add-on insurance”.

The second duty relates to the method of delivery. The seller must first assess whether the customer can receive the information by the electronic communication method the seller ordinarily uses for that purpose. If the seller is satisfied, electronic communication is mandatory. If the seller is not satisfied (e.g., the customer has no email address or the seller knows the customer cannot access digital communications), then hard copy must be given. The seller must take “reasonable steps” to make that determination. What amounts to reasonable steps is not defined; the seller may need to ask the customer or check available contact information.

In an in-person interaction, the seller has an additional duty: to offer the customer the option to receive the hard copy during that interaction, and if the customer elects, to provide it then and there. This duty arises regardless of whether an electronic communication was also given. The exception is when the add-on insurance product is sold on the basis that all disclosures and communications will be only by electronic communication. That exception would apply, for example, if the insurance policy expressly states that all communications will be by email and the customer agreed to that term. The seller must ensure that term is indeed part of the insurance terms and conditions, not just a general practice.

The seller must also ensure the information is given after the commitment to acquire the principal product or service. This means the prescribed information cannot be given before the sale; it must come after the customer is bound or has completed the purchase. This is designed to prevent the information from being buried in pre-sale documentation that the customer ignores.

The seller has no duty to ensure the customer actually reads or understands the information. The duty is only to give it in the prescribed form. However, the opt-out mechanism referenced in the information must be functional; the seller must have a way for the customer to opt out of receiving further offers. The instrument does not create a duty to process opt-outs, but that duty arises from s 12DS of the Act.

The customer’s rights are implicit. They have the right to receive the information in a clear, accessible form. They have the right to opt out of being contacted about add-on insurance using the mechanism described. The hard copy version includes a tick-box option; the customer can tick it and return the form (though the instrument does not specify whether the seller must provide a pre-addressed envelope or pay postage). The customer also has the right to contact either the principal product provider or the add-on insurance provider using the contact details provided.

The instrument does not create any private right of action for customers who do not receive the prescribed information correctly. Enforcement is through ASIC’s powers under the Act. However, a failure to give the prescribed information may mean that the add-on insurance deferral period does not start, which could affect the validity of the add-on insurance contract. That is a matter of the Act, not this instrument.

This instrument itself does not contain penalty provisions. It is a legislative instrument made under s 12DP(4) of the ASIC Act. Contravention of a condition of the instrument may lead to a breach of s 12DP of the Act or other provisions, such as s 12DB (misleading or deceptive conduct) if the failure to give prescribed information misleads the customer. The primary enforcement consequences flow from the Act.

Under s 12GX of the ASIC Act, ASIC may issue infringement notices for contraventions of certain consumer protection provisions. If a seller fails to give the prescribed information in the required form or at the required time, that may constitute a breach of s 12DP. The penalty for a contravention of s 12DP by a body corporate could be up to $1.1 million per contravention (as indexed). For individuals, it could be up to $220,000. Additionally, ASIC may seek civil penalties under s 12GDB, injunctions under s 12GD, or disqualification orders under s 12GL.

The instrument also carries reputational risk. ASIC has publicly criticised add-on insurance sales practices and has used its enforcement powers in the past. A failure to comply with the prescribed information requirements could be framed as a systemic compliance failure, leading to broader surveillance or investigation of the seller’s entire insurance sales practices.

The opt-out mechanism aspect of the prescribed information may attract enforcement under s 12DS of the Act. If the seller includes an opt-out mechanism in the information but does not actually have a working opt-out process, that could be a separate contravention.

There is no criminal penalty attached directly to the instrument, but the ASIC Act provides for criminal penalties for knowingly or recklessly providing false or misleading information to ASIC, or for obstructing an ASIC investigation. Non-compliance with the instrument would typically be dealt with as a civil breach.

The instrument does not create a statutory cause of action for customers. A customer who suffers loss because they were not given the prescribed information and therefore bought an unsuitable add-on insurance product may have a claim for breach of the ASIC Act under s 12GF (damages for contravention of a civil penalty provision) or under the general law of negligence. However, proving causation would be difficult, as the customer would need to show that, had the prescribed information been given correctly, they would not have purchased the insurance.

Enforcement is likely to be proactive. ASIC conducts surveillance and may request compliance records. Sellers should keep records of the method of delivery, the content sent, and the timing of the prescribed information. The instrument requires ongoing access for six weeks; ASIC could test whether the communication remains accessible (e.g., whether a link still works).

The instrument does not provide for a defence of “reasonable mistake” or “reasonable steps” except in the determination of whether the customer can receive electronic communication. Even that is not a defence to a failure to give the information; it only determines which method to use. A seller who gives the wrong method (e.g., electronic when the customer could not access it) has not complied, even if they took reasonable steps in good faith.

This instrument is made under the ASIC Act and operates within the broader consumer protection framework. The most direct interaction is with s 12DP and s 12DS of the ASIC Act. Section 12DP(1) defines the add-on insurance deferral period. The prescribed information under this instrument is a necessary condition for that deferral period to exist. Without the prescribed information, the seller cannot rely on the deferral period exemption, and may be in breach of the prohibition on selling add-on insurance during the deferral period.

The instrument interacts with the Insurance Contracts Act 1984 (Cth) indirectly. The Insurance Contracts Act imposes pre-contractual disclosure duties (e.g., duty of utmost good faith, duty of disclosure). The prescribed information under this instrument is separate from those duties; it does not replace or satisfy the requirement for a Product Disclosure Statement (PDS) under the Corporations Act 2001 or a Key Facts Sheet under the National Consumer Credit Protection Act 2009. The prescribed information is purely a “you can say no” warning. The seller must still give all other required documents. The instrument explicitly states that the prescribed information must not contain any words or images other than those determined. This means the seller cannot combine the prescribed information with a PDS or other disclosure; they must be separate communications.

The instrument interacts with the Electronic Transactions Act 1999 (Cth) by adopting the definition of “electronic communication” from that Act. This means that communications by voice (e.g., phone calls) are not “electronic communication” for the purposes of this instrument. A seller cannot satisfy the electronic method by leaving a voicemail. The Electronic Transactions Act also imposes general requirements for consent and accessibility, but the instrument overrides those by requiring WCAG 2.0 compliance and the specific subject line.

For in-person interactions, the instrument interacts with state and territory fair trading laws. If a seller gives a hard copy in person, that document becomes part of the transaction record and may be subject to record-keeping requirements under state laws (e.g., for motor vehicle dealers). The instrument does not exempt the seller from those laws.

The reference to Moneysmart.gov.au in the prescribed text is a government-run website. The instrument requires the seller to include that link, which may raise issues if the website changes its content or URL. The seller is not responsible for the content of that website, but the link must be included as written.

The instrument also interacts with privacy laws. The prescribed information includes the customer’s name and contact details. The seller must ensure that the inclusion of the opt-out mechanism and contact details of the principal provider and insurer does not violate the Privacy Act 1988 (Cth) by disclosing the customer’s identity to the insurer without consent, though this is likely covered by the ASIC Act’s requirements.

Finally, the instrument may interact with the ASIC Corporations (Consumer Credit Insurance) Instrument 2020/1008 and other ASIC instruments that govern specific types of add-on insurance. Sellers of consumer credit insurance (income protection, unemployment insurance attached to loans) may need to satisfy both instruments. The instrument does not contain a priority clause; both must be complied with separately. This could result in duplicative or conflicting requirements, particularly regarding timing and form of disclosure.

The instrument is ASIC (Information under the Deferred Sales Model for Add-On Insurance) Instrument 2021/632. It was made on 26 July 2021 by Anthony Graham, an ASIC delegate, and commenced on the later of the day after registration and 5 October 2021. As of the date of this analysis, the instrument has not been amended. There is no amendment history in the source text. The instrument is relatively recent, and ASIC has not yet issued a revised version. However, given the political sensitivity of add-on insurance and the mandatory period of four days (which may be considered too short or too long by different stakeholders), there is potential for future amendments. The instrument does not include a sunset clause or review date.

The source text is a single version; there is no evidence of earlier drafts. The explanatory statement that accompanies most ASIC instruments is not included in the user’s text, but it would have been published separately. The instrument is made under a specific delegation from the ASIC chairperson; the maker, Anthony Graham, is identified as a delegate. The instrument’s authority is s 12DP(4) of the ASIC Act, which allows ASIC to determine by legislative instrument information that must be given to customers for the purposes of the deferral period.

If the instrument were to be amended, it could change the prescribed text, the four-day wait period reference (though that is tied to the Act’s default, not the instrument), or the formatting requirements. Any amendment would be a legislative instrument subject to disallowance by Parliament. There is no case law yet interpreting the instrument, so amendment may be driven by industry feedback or ASIC enforcement experience.

The instrument does not contain transitional provisions. Any future amendment would need to include transition periods for existing systems. The instrument is part of a broader regulatory package that includes the ASIC Act amendments introduced by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020. The deferred sales model was a key Hayne recommendation. This instrument is the technical specification that implements the information component of that model.

There is no litigation history provided in the source text. The instrument is only three years old as of 2024, and no cases citing it were mentioned. However, it is possible that the instrument has been raised in administrative proceedings before the Administrative Appeals Tribunal or in judicial review applications. Because the instrument is a legislative instrument, it is not typically challenged directly; any litigation would involve the underlying Act provisions. For example, a challenge to the validity of a deferral period might involve whether the prescribed information was given correctly, which would require interpretation of this instrument.

No reported cases have yet considered the meaning of “convenient and ongoing access” or “reasonable steps” in the context of this instrument. The instrument’s WCAG 2.0 compliance requirement could become the subject of disability discrimination claims if a customer with a vision impairment cannot access the electronic version. However, the instrument only requires compliance with Guideline 1.4, not full WCAG compliance. That limited requirement may be insufficient under the Disability Discrimination Act 1992, which imposes broader accessibility obligations. A court could find that the prescribed information, if not accessible to a person with a disability, violates s 12DP of the ASIC Act (if the information was not effectively given). That would be an interaction between the instrument and the DDA.

The phrase “not contain any words or images other than those determined” could be litigated if a seller inadvertently includes a logo or a link. A court would have to decide whether the inclusion of a small watermark or a footer with the seller’s name constitutes a violation. The instrument’s strictness may be enforced strictly, but a court might apply a de minimis exception if the extra content is trivial and does not detract from the prescribed message.

The instrument’s opt-out mechanism description: if a seller writes “call 1800 XXX” but the phone number is incorrect or not operational, a customer could claim the prescribed information was misleading. That could give rise to a claim under s 12DB (misleading or deceptive conduct) as well as a failure to comply with the instrument.

Overall, the instrument has not yet generated significant litigation, but as ASIC increases enforcement in the add-on insurance space (following the Hayne royal commission), compliance with this instrument is likely to be tested in the courts. Any litigation would likely focus on whether the prescribed information was given in the “right” form or at the “right” time, and whether the seller’s assessment of the customer’s ability to receive electronic communication was reasonable.

Several traps await the unwary seller. First, the instrument imposes a strict prohibition on adding any words or images to the prescribed information. That means no branding, no disclaimers, no contact details beyond those required, and no formatting changes beyond what is allowed. A seller who includes a small copyright notice or a “Powered by X” logo at the bottom of the electronic communication is in breach. The hard copy version also must not contain any other content, even on the reverse side (the instrument does not address two-sided printing; presumably only the front side with the prescribed content is permitted, and any additional content anywhere on the page would violate s 5(3)(c)).

Second, the electronic version must be displayed in the body of the communication, not in an attachment or via a link. Many businesses use PDF attachments for compliance documents. That is not allowed; the text must appear inline. Additionally, the customer must have “convenient and ongoing access” for the six-week deferral period. If the communication is sent via an app that only shows the message temporarily (e.g., a disappearing message feature), that would not satisfy ongoing access. An SMS that the customer might delete would also be problematic. The safest approach is email, which the customer can archive.

Third, the seller must give the information “after” the customer commits to the principal product. If a customer signs a contract for a car loan, the seller cannot give the prescribed information before that moment. If the seller gives it along with the contract documents, but the contract is signed after the customer reads the information, that is before commitment and therefore non-compliant. The instrument requires the information after commitment. This could create a logistical problem: the seller must hand over the contract, then after the customer signs, produce the prescribed information. In an electronic sale, this could be done by sending a separate email after the purchase is confirmed.

Fourth, the in-person interaction requirement in s 6(2) applies even if the seller ordinarily uses electronic communication. The seller must verbally offer a hard copy during the interaction. If the customer elects, the seller must give it immediately. The seller must be prepared with printed copies on hand. If the seller does not have printed copies, they cannot comply. The exception for products sold on an all-electronic basis is narrow: the add-on insurance product’s terms and conditions must expressly state that all disclosures and communications will only be by electronic communication. It is not enough that the insurance policy is digital; the terms must contain that specific clause.

Fifth, the “reasonable steps” requirement. The seller must take reasonable steps to determine whether the customer can receive electronic communication. If the seller does not ask and merely sends an email to an address that the customer never uses, the seller may still be non-compliant if the customer cannot reasonably access that email. The step must be reasonable in the circumstances; for an elderly customer or a customer who has indicated they do not use email, the seller should probably use hard copy.

Sixth, the opt-out mechanism must be described accurately. If the seller uses a multi-step process (e.g., “go to our website, log in, navigate to settings, and toggle off”), that may not be a simple opt-out. The instrument does not define what constitutes a valid opt-out mechanism, but it must be functional. A seller who lists a phone number that is only answered during business hours may be in breach if the customer calls outside hours and cannot opt out.

Seventh, the hard copy version includes a tick-box that the customer can return. The instrument does not say the seller must provide a pre-addressed envelope or pay postage. However, if the customer ticks the box but cannot easily return the form (no stamp, no address), the opt-out may not be effective, and the customer could argue the prescribed information was misleading because it implied a simple return option existed.

Eighth, the instrument contains an error in the definition of “electronic communication”: it cites the definition in s 5 of the Electronic Transactions Act 1999, but that Act was amended several times. The precise definition should be checked. The instrument also misspells “Accessibility” in the definition of WCAG 2.0 (it says “Web Accessiblity Initiative” with a missing ‘i’ in Accessiblity). That typographical error does not affect enforceability but shows the instrument was not perfectly proofread.

Finally, the instrument does not provide for any grace period for technical malfunctions. If the seller’s email system fails, they may still be liable for not giving the information. The instrument contains no force majeure or reasonable endeavours clause.

Compliance requires a systematic approach covering content, format, timing, method, and record-keeping.

Content and format: Prepare templates that exactly reproduce the text in Schedule 1 (electronic) or Schedule 2 (hard copy). The only variables are: customer name, product name, insurer name, principal provider name, opt-out mechanism description, and contact details. Do not add any other text, logos, or images. For electronic communications, ensure the text appears in the body of the email or message, not in an attachment or link. The subject line must be “You can say no to add-on insurance”. Test that the font and colour contrast comply with WCAG 2.0 Guideline 1.4 Level AA. This means a minimum contrast ratio of 4.5:1 for normal text and 3:1 for large text, and text must be resizable up to 200% without loss of content or functionality. The instrument does not require WCAG compliance for the entire communication, only for the prescribed information itself. Ensure that the electronic communication platform (email, SMS, in-app message) allows the customer to retain access for six weeks. For email, this is usually automatic. For SMS, consider using a messaging service that does not auto-delete.

Hard copy version: Print on A4 white paper. Do not print anything else on the page. The headings and formatting must be exactly as in Schedule 2. The tick-box and table must be present. The hard copy must be provided only if the customer cannot receive electronic communication (after reasonable steps) or if the customer elects during an in-person interaction. Have printed copies available at point-of-sale locations.

Determining the method: Before giving the information, assess whether the customer can receive electronic communication. “Reasonable steps” could include asking the customer directly, checking records of previous communications, or verifying the customer’s preferred contact method. If the customer has previously received electronic communications from the seller for other purposes, the seller may be satisfied. If not, default to hard copy. Document the assessment: note the date, the steps taken, and the conclusion.

In-person interactions: If the customer acquires the principal product in person (e.g., at a dealership), after the commitment is made, ask the customer: “Would you like a printed copy of this insurance information?” If yes, hand them a printed Schedule 2 form immediately. Do not give the hard copy before commitment. If the add-on insurance product’s terms and conditions state that all disclosures and communications will be only by electronic communication, you can skip this step. Check the policy wording to ensure that clause exists.

Timing: Give the prescribed information after the customer enters into the commitment to acquire the principal product or service. The commitment can be a signed contract, a verbal agreement followed by payment, or any act that binds the customer. Do not give it before that moment. If the customer acquires without a prior commitment (e.g., walking into a store and buying a product at the counter), give the information immediately after the purchase is complete. For online sales, send the information in a confirmation email after the transaction is processed.

Opt-out mechanism: The prescribed information must include a description of the opt-out mechanism (e.g., “reply STOP to this message”, “call 1800 XXX”). Ensure that mechanism actually works. Test it regularly. Also provide the principal provider’s contact details as a second opt-out channel. The instrument does not require you to accept the opt-out immediately, but s 12DS of the Act imposes obligations. Make sure that the opt-out mechanism is simple and can be processed within a reasonable time.

Record-keeping: Keep a log of each instance of giving prescribed information: date and time, customer identifier, method used (electronic or hard copy), the content sent (save a copy of the exact communication), and the basis for determining the method (e.g., customer has email on file). For electronic communications, save a screenshot or the raw email with headers to show it was sent after commitment. For hard copy, retain a signed receipt or a note in the customer file. Records should be kept for at least six weeks (the deferral period) but probably longer for ASIC audit purposes (seven years is standard).

Compliance testing: Periodically audit a sample of communications to ensure the prescribed text is unchanged and the formatting meets requirements. Check that links in the text (e.g., Moneysmart URL) are still active. Ensure that the subject line has not been altered by IT systems (e.g., auto-adding a company name). For WCAG compliance, use automated tools to check contrast ratios. The instrument requires Guideline 1.4 compliance for the electronic version; you may need to adjust CSS styles in email templates.

Training: Train sales staff on the requirement to give the information after commitment, not at the start of the sale. Train them to offer a hard copy during in-person interactions. Make sure they understand they cannot add any commentary or marketing language when giving the information. The prescribed information is a standalone document; staff should not paraphrase it.

Exceptions: If the add-on insurance product is sold on an all-electronic basis (terms state that all disclosures and communications will be only by electronic communication), you can dispense with the in-person hard copy offer. But you must still comply with the electronic method requirements. Do not assume that simply because a customer bought online, the in-person requirement is waived; the waiving condition depends on the insurance product’s terms, not the sales channel.

Review the source ASIC Act provisions: This instrument only covers the information requirement. You must also comply with s 12DP (deferral period) and s 12DS (opt-out) and any other applicable laws. The prescribed information is a necessary but not sufficient condition for the deferral period. Ensure that the underlying add-on insurance product is not prohibited outright by the ASIC Act (e.g., certain exclusions).

Monitor ASIC updates: The instrument may be amended or replaced. Subscribe to ASIC regulatory updates. Also check for any no-action letters or class orders that may modify the requirements for specific industries (e.g., the National Credit Code). As at 2024, no such modifications exist, but they could.