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ASIC releases draft information sheet for insurance claims handling

On 12th November 2020, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was introduced into Parliament. On passage of the Bill, persons providing claims handling and settling services will need to be covered by an Australian Financial Services (AFS) licence, and the general conduct obligations under section 912A of the Corporations Act 2001 (Cth) (‘the Act’) will apply.

In the draft information sheet, it notes that “claims handling and settling” includes:

 

  • making a recommendation or stating an opinion in response to an inquiry about a claim or potential claim
  • making a recommendation or stating an opinion that could influence a decision about making or continuing with a claim
  • representing someone in pursuing a claim
  • assisting another person to make a claim
  • assessing whether an insurer is liable under an insurance product
  • making a decision to accept or reject all or part of a claim
  • quantifying an insurer’s liability under an insurance product

 

Prior to the proposed changes, claims handling and settling was not considered to be a financial service, and therefore not subject to the same regulation as other financial services. Under the proposed changes, some providers who were not previously required to hold an AFSL (or be authorised by one) will need to obtain one or become authorised under an existing AFSL. Existing AFSL holders can apply for a variation to cover the new financial service of claims handling and settling.

 

Are financial advisers required to adjust their authorisations and licensing?

The wording in the draft refers specifically to financial advisers: “You provide financial product advice to an insured person (including one who is a third-party beneficiary) and provide a claims handling and settling service on behalf of the insurer.” 

However, the paper doesn’t specifically exempt other financial advisers, and our initial view is that the claims handling and settling services defined above may catch the activities that many advisers conduct with their clients. 

We do note that in Professional Planner this morning, Financial Planning Association CEO Dante De Gori is quoted as saying ““We have been told by Treasury and other stakeholders that advisers not employed by insurers will be exempt,” and “The vast majority of financial advisers won’t be affected.” If this turns out to be correct, it will be a good outcome for all of us.

Madison is reviewing the requirements and will continue to monitor guidance from the regulators. If required we will consider applying for a variation to our AFSL, once we fully understand the ramifications and appropriate timing. In the meantime, advisers are still allowed to assist clients with claims, noting the following transition period:

 

If you have any queries in the meantime, please contact the Governance team for support. And to answer the most common question, lawyers are exempt from the new requirements, much to many people’s disappointment!

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Dashboard » News » ASIC releases draft information sheet for insurance claims handling

ASIC releases draft information sheet for insurance claims handling

On 12th November 2020, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was introduced into Parliament. On passage of the Bill, persons providing claims handling and settling services will need to be covered by an Australian Financial Services (AFS) licence, and the general conduct obligations under section 912A of the Corporations Act 2001 (Cth) (‘the Act’) will apply.

In the draft information sheet, it notes that “claims handling and settling” includes:

 

  • making a recommendation or stating an opinion in response to an inquiry about a claim or potential claim
  • making a recommendation or stating an opinion that could influence a decision about making or continuing with a claim
  • representing someone in pursuing a claim
  • assisting another person to make a claim
  • assessing whether an insurer is liable under an insurance product
  • making a decision to accept or reject all or part of a claim
  • quantifying an insurer’s liability under an insurance product

 

Prior to the proposed changes, claims handling and settling was not considered to be a financial service, and therefore not subject to the same regulation as other financial services. Under the proposed changes, some providers who were not previously required to hold an AFSL (or be authorised by one) will need to obtain one or become authorised under an existing AFSL. Existing AFSL holders can apply for a variation to cover the new financial service of claims handling and settling.

 

Are financial advisers required to adjust their authorisations and licensing?

The wording in the draft refers specifically to financial advisers: “You provide financial product advice to an insured person (including one who is a third-party beneficiary) and provide a claims handling and settling service on behalf of the insurer.” 

However, the paper doesn’t specifically exempt other financial advisers, and our initial view is that the claims handling and settling services defined above may catch the activities that many advisers conduct with their clients. 

We do note that in Professional Planner this morning, Financial Planning Association CEO Dante De Gori is quoted as saying ““We have been told by Treasury and other stakeholders that advisers not employed by insurers will be exempt,” and “The vast majority of financial advisers won’t be affected.” If this turns out to be correct, it will be a good outcome for all of us.

Madison is reviewing the requirements and will continue to monitor guidance from the regulators. If required we will consider applying for a variation to our AFSL, once we fully understand the ramifications and appropriate timing. In the meantime, advisers are still allowed to assist clients with claims, noting the following transition period:

 

If you have any queries in the meantime, please contact the Governance team for support. And to answer the most common question, lawyers are exempt from the new requirements, much to many people’s disappointment!

More from this Edition

 

 

 

 

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