Brought to you by:
CGU
CGU

Brokers set to be excluded from claims handling licensing requirement

Facebook Twitter LinkedIn Google

Treasury has released for consultation an exposure draft regulation paper outlining the prescribed circumstances in which a person is excluded from new laws requiring a licence to perform claims handling services.

An insurance broker as defined by the Insurance Contracts Act 1984, who arranges a contract as an agent for the intended insured and who represents the client in pursuing a claim under the contract will not need to apply for an Australian Financial Services (AFS) licence, according to the paper released this week.

Treasury says brokers who meet the criteria are exempted because claims handling is typically not their core business and they often do it for no monetary benefits.

“The purpose of these regulations is to exclude certain parties not intended to be captured but that meet the claimant intermediary definition when handling insurance claims,” Treasury said in an exposure draft explanatory material statement.

“This will avoid the unnecessary regulatory burden of requiring these parties to obtain an Australian financial services licence.”

National Insurance Brokers Association CEO Dallas Booth welcomed the proposal to exclude brokers from the claims handling licensing regime.

“Insurance brokers have played a strong and supporting role as the client’s advocate at the time of making a claim, and it is good to see the Government recognising this important role,” he told insuranceNEWS.com.au.

“At the same time, our members are very concerned about the operation of so-called ‘storm chasers’ who seek to persuade people to take cash settlements for their insurance claim, or who seek to direct repair work to specific suppliers.

“Insurance brokers have heard nothing but bad reports about these groups, and it is pleasing to see the Government taking action to protect unsuspecting policyholders via the new AFS licensing process."

Treasury released the consultation paper after the Bill covering the reform and other Hayne royal commission proposals such as a deferred sales model for add-on insurance was passed in Parliament last week.

Other persons who may carry out claims handling services but are not classified as claimant intermediaries in certain circumstances under the incoming regime include financial advisers, travel agents, veterinarians, mortgage brokers and qualified accountants.

For financial advisers, they must already have a licence to provide financial advice, they provide personal advice to a retail client and they represent the client in pursuing a claim under an insurance product.

Travel agents who are excluded from the new laws must be representing a person insured under an insurance product and the claim may be related to a number of matters covered by the policy such as financial loss for fares from any form of transport or accommodation if the insured does not start or complete the journey.

Veterinarians who are licensed at state or territory levels and are representing an insured in a claim made under the policy will not need a claims handling licence. Additionally the claim must relate to the management or prevention of a disease, injury, or condition of an animal covered by the policy.

When the claims handling licensing laws kick in on January 1 2022, insurers and other entities that meet the definition of a claimant intermediary must have an AFS licence, according to a fact sheet from the Australian Securities and Investments Commission (ASIC).

These include a person who carries on a business representing insured people in pursuing a claim in return for any benefit - monetary or otherwise.

Insurance brokers who arrange contracts of insurance for intending insureds and provide a claims handling and settling service on behalf of the insurer must also have a licence.

Closing date for submissions to the Treasury is January 25.

Click here for the exposure draft regulations document and here for the explanatory statement.