The insurance premium funding industry has officially won an exemption to key aspects of Australia’s anti-money laundering legislation after two years of industry lobbying.

The exemption means data collected in the financing of general insurance contracts will not be subjected to stringent new collection and verification rules, introduced as part of the Anti-Money Laundering and Counter-Terrorism Financing Act.

Industry representatives say the decision will save the small industry more than $50 million a year in compliance costs.

Premium funding was identified as a potential target for money laundering due to the cancellation and refund process of high-value contracts.

Although stringent rules around that process will remain, the Australian Transaction Reports and Analysis Centre (Austrac) has agreed to reverse an earlier decision to deny an exemption regarding the collection and verification process.

Pacific Premium Funding Chairman Grant Burley welcomed the decision.

“The big issue would have been a decline in customer acceptance of premium funding, driving down industry profitability and in the end intermediary income,” he told insuranceNEWS.com.au.

Mr Burley says the original rules around collection and verification of data “required extensive manual handling and would undermine both the acceptance and cost of the product”.

Premium funders were also concerned onerous obligations didn’t extend to insurers which placed premiums on monthly instalments for customers, “thus creating an uneven playing field”.

He says the issue “may not have been high on everyone’s radar but it was set to change the shape of the industry had the outcome not been achieved”.

Premium funding companies will still need to alert Austrac of any suspicious matters and will be subject to random procedural audits by the regulator.

Austrac will review the decision in 2011.