ASIC has released a draft information sheet on insurance claims handling and settling regulation when the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 is passed.
Persons providing claims handling and settling services will need to be covered by an Australian Financial Services (AFS) licence or be authorised by another AFS licensee on the later of the day after Royal Assent and 1 January 2021. The general conduct obligations under section 912A of the Corporations Act 2001 (Cth) will apply.
Until now, claims handling services have been exempt from the definition of ‘financial service’ under the Act, and, therefore, persons providing claims handling services have not been required to hold an AFS licence.
The licence requirements will apply to:
- insurers;
- insurance claims managers;
- tradespersons (referred to as ‘insurance fulfilment providers’) who can reject claims on behalf of an insurer;
- insurance brokers who handle claims on behalf of an insurer;
- financial advisers who handle claims on behalf of an insurer; and
- people that carry on a business of representing people to pursue insurance claims for reward (referred to as ‘claimant intermediaries’).
Entities that already hold an AFS licence will need to apply for a variation to their licence so it covers the new financial service of claims handling and settling.
The draft information sheet:
- sets out who needs to be authorised to provide claims handling and settling services for insurance products and who can act on an AFS licensee’s behalf;
- explains how and when to apply for an AFS licence, or variation to an existing AFS licence, including materials that are needed to support an application; and
- refers to existing regulatory guidance on how to meet the general obligations under section 912A of the Act, and indicates how the obligations may be tailored to claims handling.
ASIC has also released a draft version of C12 Proof: Claims Handling and Settling Service Statement. Applicants seeking an AFS licence authorisation for claims handling and settling services will be required to supply this statement as part of their application.
Transition Timetable
ASIC expects to start taking applications for AFS licences, and variations to existing licences, from 1 January 2021 (subject to the Bill’s passage before the end of this year).
ASIC says that during the transition period between 1 July 2021 and 31 December 2021 claims handing and settling services can only be provided if a complete application was lodged by 30 June 2021, and it has either been granted or is still pending.
From 1 January 2022 claims handling and settling services can only be provided if the application has been granted.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
