Insurance claims handling to be made a financial service

The Federal Treasury has released draft legislation on making insurance claims handling a financial service, and therefore subject to regulatory oversight by ASIC.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry recommended that the handling and settlement of insurance claims, or potential insurance claims, should no longer be excluded from the definition of ‘financial service’.

NIBA CEO, Dallas Booth has said, “NIBA will be reviewing the draft Bill, and will provide a submission to Treasury early in the new year.”

The draft legislation and regulations released for public consultation exposure include the following:

  • remove the exclusion of insurance claims handling and settlement services from the definition of a ‘financial service’ in the Corporations Act 2001;
  • make handling and settlement of an insurance claim, or potential insurance claim, a ‘financial service’ under the Corporations Act 2001; and
  • tailor application of the existing financial services regime to the new financial service of handling and settling an insurance claim.

The explanatory statement for the draft Bill specified that there are two key components in the Bill. First, the Bill creates the new ‘financial service’ of handling and settling an insurance claim under the Corporations Act 2001. Secondly, the Bill amends the Corporations Act 2001 to tailor the application of the existing financial services regime to the new financial service of handling and settling an insurance claim.

The proposed laws will apply to insurance brokers who handle insurance claim on behalf of an insurer, and will also apply to any person who provides financial advice to an insured and who handles and settles an insurance claim on behalf of the insurer.

Further details, including the draft Bill and Explanatory Memorandum, are available here. Submission to this consultation can be made up until 10 January 2020.