Proposed Funding Model for Australian Financial Complaints Authority (AFCA)

AFCA has released a consultation paper which sets out how the new dispute resolution body proposes to recover its costs of operations.

NIBA is reviewing the consultation paper, and will prepare a submission on behalf of Members. The peak body for brokers will also provide a short summary of the proposed arrangements.

A three-phase funding model approach for AFCA has been developed, consisting of initial transition funding for establishing AFCA:

  • Phase I – Transition funding
  • Phase II – Interim funding model
  • Phase III – A long-term funding model

The focus of the consultation paper is on the transition and interim funding arrangements for AFCA. The proposed funding model covers the transition from FOS to the new AFCA arrangements in the 2018/2019 financial year, and the ongoing funding of AFCA once it takes full effect on 1 November 2018.

The proposed AFCA funding model has three components. These reflect and take into account the existing user pays, industry funded model used by the predecessor Ombudsman schemes. The three components of the proposed funding model are:

1. Membership levy based on the size and type of business
2. User charge based on the number of complaints (for Firms with more than one complaint closed past the initial Registration and Referral stage)
3. Complaint fees based on complaint complexity and the resolution stage reached.

If insurance brokers have any questions or comments on the proposed funding model they can email NIBA CEO, Dallas Booth: dbooth@niba.com.au.

NIBA will prepare a submission to AFCA by Friday 27 July. Broker are requested to provide comments, questions, and other commentary by the close of business on Wednesday 18 July 2018.