ASIC releases draft information sheet for insurance claims handling

The Australian Securities and Investment Commission (ASIC) has released a draft information sheet on insurance claims handling and settling.

This follows the introduction of the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 into Parliament last month. 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 will apply.

Industry participants that will need to get an AFS licence for claims handling and settling or be authorised by another AFS licensee are:

  • 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.

ASIC will issue the final information sheet and proof document, incorporating any changes to the legislation during passage of the Bill, ahead of the commencement of the reforms.

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). Applicants are strongly encouraged to submit their applications as soon as possible because:

  • 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, and
  • from 1 January 2022 claims handling and settling services can only be provided if the application has been granted.

The regulator has reveled that in the lead up to the commencement of the reforms, they will continue to engage with industry about their implementation of the new requirements and whether ASIC can provide additional assistance to help industry transition to the new requirements.

You can find more information via the following links: