Assurance Cover Australia (ACA), a provider of discretionary cover for motor vehicles and drivers, has had its financial services licence cancelled as it did not have the mandatory professional indemnity (PI) insurance, the corporate regulator announced today.

The Australian Securities and Investments Commission (ASIC) says in a statement the cancellation of the Australian financial services licence (AFS) took effect from April 5.

“ACA operated an unregistered managed investment scheme, Assurance Cover Australia, which provided cover through a discretionary mutual fund for drivers in the peer-to-peer transport industry,” the ASIC statement says.

“ASIC cancelled the AFS licence because ACA did not hold the required professional indemnity insurance cover since April 26 2019.”

The regulator says the terms of the cancellation order allow ACA to provide financial services that are reasonably necessary for, or incidental to the winding up of the scheme until June 30.

ACA may apply to the Administrative Appeals Tribunal for a review of ASIC’s decision, it says.

ACA has issued a response to the licence cancellation.

"Assurance Cover Australia Pty Ltd has not held professional indemnity insurance since 26 April 2019. This is because it was not and is not commercially available," it told insuranceNEWS.com.au.

"ACA self-reported this issue to ASIC a number of years ago and suggested alternatives one of which was a restructure such that participants of the peer-to-peer transport industry may continue to benefit from its competitive pricing.

"Following its restructure to P2P Cover Limited, which has entered into an intermediary authorisation with Drive Cover Services Pty Ltd which holds its own AFSL, ACA advised ASIC it no longer requires its AFSL and it may be cancelled."

ASIC suspended ACA’s licence on July 28 last year and then extended the suspension until April 3 this year. The terms of the extended suspension permitted ACA to continue to provide financial services to existing clients while seeking alternate strategies to put compliant compensation arrangements in place.

ACA was established in 2014 to respond to the rising cost of vehicle insurance in the point-to-point transport industry and ASIC says the business has held its AFS licence since September 9 2014.

A copy of ACA’s product disclosure statement (PDS) on its website says Assurance Cover Australia is administered and managed by the Trustee.

“The Trustee does not, and has not, since 26 April 2019, held PI insurance,” the PDS, issued in February last year, says.

“The Trustee continues to seek to obtain PI insurance and has a reserve of $2 million of its own assets to fund potential claims as an interim measure until, or if, PI becomes commercially available.”