The general and life insurance industry is expected to pay a total levy of about $24.702 million to support regulatory work carried out in the last financial year by the Australian Securities and Investments Commission (ASIC).

ASIC today published its 2020/21 Cost Recovery Implementation Statement (CRIS), in which the regulator also addresses stakeholder concerns in relation to the way levies are calculated and why it has gone up in recent years.

The regulator says an increase in levies for a subsector is a reflection of ASIC’s “more intensive” regulatory activities in that business category.

“We take an active role to enforce the laws we administer to maintain integrity and trust in the financial system and this includes regulating the boundaries of permitted conduct,” ASIC said.

“The costs of investigating suspected misconduct in the course of deciding whether to pursue an enforcement remedy or any non-enforcement outcomes are a necessary part of the costs of regulating a subsector.”

The regulator says the final CRIS summarises the feedback it received and the actual levies will be published next month, followed by issuance of invoices in January.

ASIC consulted in July on the draft CRIS, an exercise it has carried out annually since the government announced in 2016 the introduction of an industry funding model for the corporate regulator.

The $24.702 million estimate is the same as previously flagged in the draft CRIS, of which $16.113 million will be collected from cost recovery levies and $8.589 million from statutory levies.

ASIC has however trimmed the forecast it expects to collect from the financial services industry, to $337.553 million from $359.6 million.

The CRIS has been prepared on the basis of ASIC’s planned regulatory work and estimated levies to recover regulatory costs at the beginning of the 2020/21 financial year.

The indicative levies for 2020/21 are a guide only and there will be differences between indicative and actual regulatory costs, once known.

“This may be due to changes in our operating environment and the conduct of our regulated population during the year that requires us to adapt to new developments and emerging threats and harms,” ASIC said.

“It may also be driven by the changing nature of enforcement matters as they progress through the stages of investigation and litigation.”

ASIC says it is well aware of the challenges and difficulties facing many businesses due to the COVID-19 pandemic, and their concern has been highlighted in the industry feedback.

“We will continue to consider applications for waivers on a case-by-case basis,” the regulator said.

ASIC says in the 2020/21 year, its insurance regulatory work focused on protecting consumers from harm during a time of heightened vulnerabilities as a result of the COVID-19 pandemic and natural disasters.

The regulator’s work includes minimising poor or unfair outcomes resulting from the design or distribution of insurance product and ensuring that insurers process and determine claims affected by the pandemic and natural disasters in a timely manner with the utmost good faith.

It focused on many areas during the period such as claims handling, mis-selling, hardship assistance, governance and small business insurance cover.

In relation to small business insurance cover, ASIC worked with the Australian Financial Complaints Authority and Australian Prudential Regulation Authority to clarify business interruption policy with regards to COVID-linked losses.

The CRIS estimates insurance product providers will pay about $14.837 million in cost recovery levy and $6.278 million in statutory levy. It did not provide a breakdown for general and life product providers.

ASIC says in the preceding 2019/20 financial year it cost $18.1 million in total to regulate insurance product providers.

Insurance product distributors – where a flat levy applies – will pay about $2.408 million in cost recovery levy and $2.208 million in statutory levy.

The cost of regulating insurance product distributors in 2019/20 was $3.9 million, ASIC said.

Click here for the Cost Recovery Implementation Statement.