Ask an Expert: What can insurers expect from the simple advice regime?

At the core of the new regime is a recognition that the current regulatory framework has become too complex and expensive leaving many Australians unable to afford or access the advice they need. Some estimates put the cost of personal advice at over $5,000.

The government’s goal is to slash this cost by as much as 40% through simplified advice pathways.

The simple advice regime aims to create a middle ground between general and personal advice. Under current laws, personal advice, defined as advice that considers the personal circumstances of the client, carries a high compliance threshold, including obligations like the best interest duty, the provision of Statements of Advice, and extensive documentation.

In contrast, general advice offers no consideration of the customer's specific circumstances, which limits its usefulness for consumers navigating complex insurance decisions.

The new model proposes a streamlined advice category — provisionally referred to as “simple advice” — that would allow for some consideration of the client's personal circumstances without the full burden of personal advice regulation.

What insurers can expect is that simple advice will be restricted in some key ways. It is likely to apply only to existing customers, in response to questions they initiate. It will be confined to products offered by APRA-regulated entities, and advisers will only be allowed to charge a one-off fee, with commissions and ongoing fees prohibited.

This positions the regime well for life and general insurers who want to engage more proactively with their customers—but only within clearly defined boundaries.

How simple advice is ultimately defined will be critical. While legislation is still forthcoming, early indications suggest three possible approaches to definition:

1. One-off in nature: Advice may be limited to a single interaction, such as helping a customer choose an insurance product at the point of sale. Any follow-up or ongoing advice would likely fall outside the scope.
2. Narrow in topic: Simple advice may be limited to addressing a single, clearly defined issue—for example, whether to increase a sum insured or add a specific benefit—rather than offering holistic financial planning or product comparisons.
3. Linked to product risk: There is growing support for the idea that simple advice will apply only to lower-risk products, such as general insurance or basic life insurance. These are seen as easier to explain, less complex to compare, and more suitable for simplified guidance.

Despite its name, defining “simple” advice is anything but straightforward.

What seems simple for an experienced insurer may not be simple for a consumer. And some questions that sound complex may have relatively standard, easy-to-deliver answers. This subjectivity could lead to future compliance challenges, particularly in interpreting the boundaries of what’s allowed.

For insurers, especially life insurers, the potential upside is significant: a more accessible pathway to provide value-added advice, improve customer outcomes, and reintroduce cost-effective advisory models within a vertically integrated business.

But they will need to prepare carefully - ensuring that their advice models, staff training, and oversight systems can adapt to a principles-based framework that will likely evolve over time. In this environment, clarity, control, and compliance will be key.

Attributable to Matt Ellis, Partner at Sparke Helmore Lawyers.

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