Remediation Blind Spots: Are Governance Gaps Putting Your Firm in ASIC’s Sights?

In the current regulatory climate, consumer remediation is one of the most high-stakes, resource-intensive, and reputation-defining activities an insurance firm or any firm can undertake. The pressure is immense. Boards demand progress, customers require fair outcomes, and regulators are observing with unprecedented focus.

This focus has been sharply clarified. ASIC’s announcement of its 2026 enforcement priorities explicitly targets “Claims and complaint handling failures by insurers” as a key area of concern. This is a clear signal that the regulator’s patience for poorly executed or ineffective remediation programs is exhausted. Regulators expect that when things go wrong customers are restored to the position in which they would otherwise have been in a timely and fair manner.

For any firm engaged in, or planning, a remediation, this raises the stakes from “getting it done” to “getting it demonstrably right.”

The challenge is that many programs, despite vast budgets and significant effort, fail to achieve sustainable change. They become stuck in a cycle of review, rework, and re-breach, failing to satisfy the Board or the regulator.

The problem is rarely a lack of intent. It is almost always a failure of governance. These are the “remediation blind spots”—the critical gaps in oversight, methodology, and assurance that prevent a program from achieving its fundamental objective.

Fortunately, ASIC has provided a clear roadmap for success in its Regulatory Guide 277: Consumer Remediation (RG 277). This guide, combined with the new enforcement priorities, creates a powerful framework for understanding both the pitfalls and the pathway to effective, compliant, and sustainable remediation.

The Governance Deficit: Common Remediation Blind Spots

Remediation programs operate under unique pressure, exposing and amplifying any underlying weaknesses in an organisation’s governance and risk frameworks. From an assurance perspective, several common blind spots consistently emerge.

1. The Superficial Root Cause Analysis

The most common and costly blind spot is a failure to identify the true, systemic root cause. The pressure to act often leads to a premature focus on symptoms—for example, refunding a cohort of customers—without a deep, multi-layered investigation into the disease.

Was the breach a simple process error? Or was it a flawed product definition, a perverse incentive structure, a critical data lineage failure, or a deep-seated cultural issue?

RG 277 is built on the principle of understanding the “nature, extent and impact of the misconduct or other failure.” A superficial root cause analysis makes this impossible. It guarantees the program will be a costly “band-aid” and that the problem, or a variation of it, will re-emerge.

2. Misleading Program Metrics

A common governance failure is the disconnect between project reporting and outcome-based reporting. Steering Committees are often presented with dashboards that are superficially “green”—milestones are met, project spend is on track, and initial payments are being made.

However, these metrics often obscure critical “red” flags. Are the correct customers being identified? Are the assumptions used to calculate compensation fair and robust? Is the “fix” actually working? A recent ASIC review of remediation practices specifically called out a “lack of focus on fairness” in governance frameworks. When project management metrics (time, cost) override consumer-outcome metrics (fairness, completeness), the Board is given a false sense of security. The program is then exposed to regulatory failure.

3. The “Three Lines” Model Under Duress

An effective remediation program should leverage the “Three Lines” model, but in practice, the model often collapses under the pressure.

  • Line 1 (The Business) is tasked with both running its daily operations and executing the remediation. This creates significant resource conflicts and conflicts of interest.
  • Line 2 (Risk & Compliance) is frequently co-opted into the program, often seconded to help design the “fix.” This fatally compromises its independence. It cannot be expected to provide objective oversight and challenge on a program it helped to build.
  • Line 3 (Internal Audit) may lack the specific subject matter expertise or capacity to audit a complex, in-flight program. Rather than waiting until it is “finished” to provide a backward-looking review—by which point, it is too late to course-correct.

This blurring of roles creates an “assurance vacuum,” where no one is providing the independent, expert, and real-time challenge the program’s governance body needs to make informed decisions.

4. A Flawed Definition of “Done”

Many programs define completion as “the last customer has been paid.” This is a critical blind spot.

For regulators, “done” means: The root cause has been identified and fixed, all affected customers have been returned to the position they would have been in. The new controls have been designed, implemented, and tested to prove they are sustainable and effective.

Without this verifiable proof of sustainable change, the program has failed a fundamental test. It has fixed the past but left the firm just as vulnerable to the future.

A Framework for Effective Remediation: Aligning with RG 277

Moving from these blind spots to a position of strength requires a deliberate governance framework built on the principles of ASIC’s RG 277. The guide is not merely procedural; it is a principles-based framework for ensuring remediations are “efficient, honest, and fair.”

1. Establish a “Consumer-Centric” Governance Charter

The first principle of RG 277 is to return consumers “as closely as possible to the position they would have otherwise been in.” This must be the primary objective of the program’s governing body (e.g., the Steering Committee), enshrined in its Terms of Reference.

What to do:

  • Establish Clear Accountability: Ensure the governance body includes senior executives with the authority to make difficult, cross-divisional decisions.
  • Define Success: The primary success metric must be “fair consumer outcomes,” not speed or cost.
  • Document Key Decisions: RG 277 mandates that key decisions and judgements are “justified and documented.” This includes the remediation’s scope, the methodology for identifying customers, and the assumptions used to calculate loss.
2. Mandate a Robust and Verifiable Methodology

RG 277 is clear: licensees must “give consumers the benefit of the doubt” and use “beneficial assumptions” to address knowledge gaps, such as incomplete records. This is a critical technical and ethical challenge.

What to do:

  • Challenge Assumptions: The governance body must rigorously challenge any assumptions that seek to limit the scope (such as narrow look-back periods) or minimise the quantum. The guiding question must be, “Is this assumption fair to the customer?”
  • Invest in Data: Acknowledge that poor data is a licensee’s problem, not the consumer’s. A core function of the program must be to invest in the data analytics required to find all potentially affected consumers. This approach is necessary to avoid making it “easy” by using an incomplete list.
  • Test the Scope: Before finalising the cohort, conduct rigorous testing. Ask “who else might have been affected?” and “what other products or processes may be affected by this issue?”
3. Integrate Proactive, Independent Assurance

Given the conflicts of interest and inherent biases in a high-stakes program, objective assurance is not optional. It is a critical governance control. Rather than waiting for a regulator to mandate it, leading firms build independent assurance into their program design from the beginning.

This proactive approach provides the Board and Steering Committee with the objective “health check” they need to counter internal biases and “green” status reporting.

What to do:

  • Integrate Assurance at Key Milestones: Independent assurance is most valuable when applied at key decision gates, not just at the end.
    • At Design: An expert review can validate the root cause analysis, challenge the proposed scope, and assess the fairness of the intended methodology before significant resources are committed.
    • Mid-Flight: An objective review can test whether the program’s assumptions are holding true and if the methodology is being applied consistently. It can also test if changes need to be made to ensure the objective of the remediation is met.
    • At Completion: This is the most critical stage. An independent expert can provide assurance that the “definition of done” has been met, including validating that the new controls are designed effectively and, most importantly, are operating effectively in the business-as-usual environment. Additionally, firms should learn firms the review and avoid any future remediations.
4. Drive to Sustainable Closure

Finally, RG 277 is ultimately about ensuring the licensee does not “profit from the misconduct or other failure.” This extends to fixing the systems and processes that allowed the failure to occur.

What to do:

  • Link Remediation to Risk Frameworks: The “fix” cannot be a standalone project. The new controls, process maps, and monitoring must be formally handed over and embedded into the firm’s Line 1 and Line 2 risk management and compliance frameworks.
  • Implement a Control Testing Plan: A “new control” is just a design until it is proven to work under pressure. The program must include a plan for post-implementation testing (e.g., at 3, 6, and 12 months). This provides verifiable evidence of sustainability to the Board and regulators.

From Remediation to Resilience

Consumer remediation programs are a profound test of an organisation’s competence, culture, and integrity. The new ASIC enforcement priorities for insurance are a clear warning that failures in this area will attract severe regulatory action.

However, ASIC’s RG 277 also provides the guidebook for success. By moving beyond a “tick-a-box” project management approach and adopting a robust governance framework built on fairness, accountability, and independent assurance, firms can navigate these challenges.

Having the right building blocks in place to remediate in a timely and fair manner sets a remediation program up for success. A successful remediation does more than just fix a past wrong. It demonstrates a commitment to sustainable change and builds organisational resilience. Over the long term it is the only pathway to rebuilding trust with both customers and regulators.

Contact MIntegrity today for a confidential consultation and expert regulatory support.

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