In last night’s Budget, the Government announced the merger of the Financial Ombudsman Service with two other dispute bodies to form the Australian Financial Complaints Authority. The new body will start operating on 1 July 2018.
All financial firms, including AFS licence holders in the insurance broking sector, will need to be members of the new body. Financial firms will fund the new body (as occurs now with FOS), but it is not clear whether the basis of industry funding will change.
Importantly, the new body will have the capacity to deal with disputes up to $1 million, and the power to award compensation of up to $500,000. However, the Government has indicated it will undertake consultations in relation to compensation limits for disputes relating to general insurance products – and the sub-limits applying to insurance products (which would include the maximum awards that could be made for insurance broker disputes)
The Government wants to extend the jurisdiction of the new body so it can handle small business disputes up to $1 million, with an ability to award compensation of up to $500,000.
ASIC will be given greater powers to monitor and oversee the operations of the new body.
The Government has also indicated it will require financial firms to report to ASIC on their Internal Dispute Resolution activity, including the outcomes for consumers in relation to complaints raised as part of the IDR processes within the firm.
The Chief Ombudsman, Mr Shane Tregillis, has indicated FOS welcomes the announcement, and will work with the Government and ASIC to implement the reforms. In the meantime, FOS will continue to deal with disputes lodged under the existing arrangements.
NIBA will provide further information to Members as elements of the new disputes body are clarified.