The unkind among us would suggest there’s plenty of evidence that governments and public servants tend to overshoot when it comes to controlling and monitoring the behaviour of business. The Financial Services Reform Act (FSRA) is a case in point and so, it seems, is the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act).

Each contained some good aspects and some bad. Each also lumped the general insurance industry in with the greater mass of the financial services sector, without recognition of the aspects that make general insurance unique.

The FSRA has since undergone its own extensive reforms to adjust to realities and work on a more logical basis, and now it’s the turn of the AML/CTF Act.

Austrac, the Australian Transaction Reports and Analysis Centre, wanted all financial services licensees to record and report premium funding arrangements. The amount of information sought made sense in the case of large funds changing hands, but not in the case of premium funding transactions.

In fact, if brokers had been forced to collect the amount of information Austrac wanted from each policyholder opting for premium funding, the refusal rate may well have killed off premium funding as we know it.

Now Austrac has changed its view, thanks to lobbying by NIBA and the Insurance Premium Funding Association of Australia (IPFAA).

Austrac’s new view is that for the law to apply to an AFS licensee, the designated service they are arranging must also be a financial service. This means that insurance brokers arranging general insurance and also premium funding will not be affected and they will have no direct legal obligations.

The IPFAA had good reason to be very concerned. They believed the cost of the new legislation would exceed $60 million, and last November submitted a request for an exemption. But they were knocked back.

Pacific Premium Funding Chairman Grant Burley persisted in pushing for a change of heart by Austrac and got on the lobbying bandwagon with NIBA. Last week he was able to announce his efforts have been successful – albeit in an unexpected way.

It appears that if Austrac had understood more about general insurance and premium funding in the first place, they might have been more amenable to the original IFPAA application for an exemption.

Mr Burley says it became clear during the negotiations that some of the reasons for refusing the original application weren’t fully understood by the bureaucrats.

“The original exemption was revisited,” he told insuranceNEWS.com.au. “The industry has now received the appropriate exemption from Austrac, relieving it from the collection and verification of data on insurance premium finance loans for general insurance in nearly all instances.”

It’s a significant breakthrough, and one that’s being greeted with relief by the premium funders – a group Mr Burley says “is already under immense competitive pressure and suffering as a consequence of low insurance premiums and relatively low interest rates”.

Despite the exemption, funders will still have some reporting obligations, which are yet to be finalised. But the tough part has been passed, and yet another regulatory overshoot has been made good.