Treasury has opened consultations on draft legislation that will make insurance claims handling subject to oversight by the Australian Securities and Investments Commission (ASIC).

The bill, which creates a new “financial service” of handling and settling an insurance claim under the Corporations Act, was developed in response to a Hayne royal commission recommendation.

The change is planned to come into effect from July next year and would apply regardless of when the insurance product was entered into.

Those affected would include insurers, loss adjusters, fulfilment providers with authority to reject all or part of a claim, claims managers, certain insurance brokers and certain financial advisers.

National Insurance Brokers Association (NIBA) CEO Dallas Booth today flagged the release of the draft legislation and regulations.

“NIBA will be reviewing the draft bill, and will provide a submission to Treasury early in the new year,” he said.

Commissioner Hayne noted that there is no basis in principle or in practice for continuing to exclude claims settling and handling from the definition of financial service in the Act.

For consumers the "intrinsic value" of an insurance product lies in the ability to make a successful claim when an insured event occurs, the explanatory statement released with the draft documents says.

“Insurers and their representatives are expected to handle and settle an insurance claim fairly, transparently and without delay,” it says.

“When an insurance claim is not handled and settled in this manner, it can lead to disputes and financial loss to the insured, which can undermine public trust in the financial sector.”

The consultation on the draft documents closes on January 10. More details are available here.

The Federal Government has also moved ahead on a Hayne recommendation to extend the unfair contract terms regime to insurance, with Treasurer Josh Frydenberg introducing a bill into the House of Representatives yesterday.

“Ensuring consumers and small businesses can purchase or renew their insurance policies with confidence is important,” Mr Frydenberg said.