ASIC says iExtend model is a financial product
The Australian Securities and Investments Commission (ASIC) has signalled the extent to which it is prepared to encompass derivative offers as financial products by subjecting an enforceable undertaking on iExtend Holdings.
The importance of ASIC’s action is that it deems the iExtend business model to be a financial product.
ASIC said an investigation had revealed that iExtend was offering to pay people’s life insurance premiums in exchange for a portion of the benefit if a claim is made.
It said that to give effect to this arrangement, iExtend acquired interests in life insurance policies by entering into a co-ownership deed with policy holders.
The court-enforceable undertaking entered into by iExtend requires the company to now apply for an Australian Financial Services Licence to issue financial products, to provide general advice and to provide claims handling and settling services.
Reinforcing ASIC’s approach, deputy chair, Sarah Court said firms dealing in financial products had a legal obligation to be licensed.
“The licensing regime requires financial services businesses to meet important disclosure, design and distribution obligations. ASIC has taken this action to ensure that iExtend’s customers are afforded the same protections as for the rest of the industry,” she said
“Anyone dealing in a financial product or providing financial advice must have an AFS licence or be appropriately authorised under an AFS licence unless an exemption applies.”
Meanwhile residential real estate investment, the financial product used by most Australians for by far the largest amounts of money, is deemed not to be a financial product and has hardly any regulation or consumer protection.
That’s because property never goes backwards : – )
And Sales Commissions on Real Estate never cause any conflict of interest.
I can’t see how what iExtend does makes them a product provider, however if this clears up the issue, and they can go back to doing what they are doing with certainty about where they stand, then that is a good thing.
A company willing to pay for someone else’s life insurance premium when they can’t afford it and want to cancel is a financial product.
What about AfterPay or Deferit, who pay for people’s groceries, shoes, shopping, and bills when they can’t afford to pay them? Will they also become financial products?
Would iExtend have to disclose that it is in their interest for the Life insured to become Injured and or Die, thus iExtend gets paid out.
I wonder if these Lives insured have any higher claim rates ?
To be honest I was uncomfortable with their business when they approached me