By Daren Curry, Partner
Following the introduction of the Financial Sector Reform Bill 2020 into Parliament in November, the Australian Securities and Investments Commission (ASIC) has released a draft information sheet providing information on obligations in relation to insurance claims handling and settling and AFS licence requirements for participants.
In early November, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was introduced into Parliament, a key aspect of which for insurers is the proposal to make claims handling and settling a “financial service” in the Corporations Act 2001 and therefore subject to regulatory oversight by ASIC.
As part of the new laws, certain categories of individuals and organisations who provide claims handling and settling services must be covered by an Australian Financial Services (AFS) license. In anticipation of the Bill being passed, ASIC have released an information sheet which aims to provide assistance and guidance to both the insurance industry and those who work within and around it as to:
- how the AFS licensing regime applies to claims handling and settling services from 1 January 2022
- who needs to be authorised to provide claims handling and settling services for insurance products and when an AFS licence or variation for claims handling and settling is needed
- what are the obligations of an AFS licensee and how these obligations apply to claims handling and settling, and
- when and how to apply for an AFS licence or variation, including transitional arrangements, and how ASIC will assess applications.
Whilst the information sheet is in draft form at this stage, once the Bill has passed through Parliament, ASIC will issue the final information sheet, incorporating any changes to the legislation during passage of the Bill, prior to the commencement of the reforms.
The information sheet is a must read for insurance fulfilment providers, claims managers, brokers, loss adjusters, experts, investigators and other professionals as it sets out who is required to obtain an AFS license, who is exempt from the requirement to be licensed and who can provide services on behalf of an AFS licensee, under that licensee’s existing AFS license.
Insurers and other entities that already hold an AFS licence must apply for a variation to their licence so that it covers the new financial service of claims handling and settling.
ASIC will issue the final information sheet and proof document ahead of the commencement of the reforms. It will start taking applications for AFS licenses and variations to existing licenses on January 01, 2021
The complete information sheet may be viewed here.
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