If Treasurer Josh Frydenberg thinks Peter Kell's sudden resignation as deputy chairman of the Australian Securities and Investments Commission will absolve the government of any responsibility for lax enforcement of wayward activity in financial services he should think again.
Kell has been the face of ASIC at the Hayne Royal Commission over the past few months when counsel assisting, Rowena Orr, QC, exposed less than vigorous enforcement of the law in superannuation, financial advice, life insurance and general insurance.
But the less well known issue exposed by the Hayne inquiry is the federal government's abject failure to give ASIC sufficient legal powers to punish bad behaviour, particularly in the insurance sector.
The fact is the government has been a soft touch for the powerful lobbying efforts of companies in the life and general insurance sectors. The companies won the argument about the need for a light-handed regulatory approach.
But as we have seen this week, self regulation was actually a licence to exploit consumers.
Frydenberg's obvious frustration with ASIC bubbled over last week in a series of interviews attacking its performance under former chairman Greg Medcraft.
Frydenberg promised to give new chairman James Shipton the legislative power to act against wrongdoing.
His government could have acted much earlier.
There are a series of reforms in insurance which should be implemented with alacrity.
The exemption for insurance claims handling in the Corporations Act should be dumped forthwith. This will ensure ASIC has the power to take action against poor claims handling.
The exemption of life and general insurance from the Unfair Contract Terms laws should be dumped as soon as possible. This would outlaw the use of unfair terms in insurance contracts.
Deft lobbying has meant that there are no monetary penalties for breaches of the "utmost good faith" provision in the Insurance Contract Act.
The recent ASIC enforcement review recommended civil penalties for breaching this provision.
ASIC has always wanted to see more effective disclosure for general insurance, including requiring disclosure of prior year premiums in annual renewal notices.
Financial Services Minister Kelly O'Dwyer had made announcements about many of these issues but there was no sense of urgency in having them implemented.
Kell can't be blamed for lack of support from the parliamentary executive. His job would have been a lot easier if the government had delivered on its promise to give ASIC product intervention powers.
He would have been better equipped to deal with dodgy activities had the government moved more quickly to increase penalties for breaches of the law, made breach reporting more effective and gave ASIC direction powers enabling it to force companies into remediation programs.
Kell would have been in a stronger position if he had been able to force industry codes of practice to be made mandatory and enforceable.
Also, he would have been able to wield a big stick if the government had given ASIC the power to ban people from managing financial services businesses.
Kell's departure will present a challenge to Shipton because it will mean a significant loss of corporate memory.
He knows where all the bodies are buried as well as understanding the tactics needed to navigate past companies employing defensive and legalistic approaches to regulatory oversight.
During his seven years at ASIC Kell led sector reviews into direct life insurance, credit cards, mortgage broker remuneration and vertically integrated firms.
His enforcement scorecard includes ASIC's successful action on responsible lending against Westpac Banking Corp, the fees-for-no service action against National Australia Bank, action against payday lender Cash Store and action against the operator of a general store in South Australia for exploiting Indigenous customers.
After he leaves in December this year residents on Sydney's leafy north shore should get used to seeing a lot more of Kell running through the suburban streets. He deserves a break after doing the hard yards at ASIC.Tony BoydThis article was first published by https://www.afr.com/Author: Chanticleer