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ASIC information sheet sets out claims handling reform details

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Applications for claims handling licences will be accepted by the Australian Securities and Investments Commission (ASIC) from January 1, if the Bill for the Hayne royal commission proposal is passed in Parliament before the end of this year.

A draft information sheet from the regulator urges insurers, brokers and others involved in claims handling and settling to begin their preparations to transition to the new regime, when claims handling will be regulated as a financial service under the Corporations Act.

The Bill covering the claims handling reform and other royal commission proposals such as add-on sales and hawking was introduced into Parliament earlier this month.

The ASIC draft information says an Australian Financial Services (AFS) licence will be mandatory for anyone who is involved in claims handling and settling from January 1 2022.

The licensing requirement will apply to insurers, insurance claims managers, tradespersons who can reject claims on behalf of an insurer, brokers, financial advisers and claimant intermediaries who are defined as “people that run a business representing customers to pursue insurance claims for reward”.

Entities that already have an AFS licence will need to apply for a variation to their licence so it covers the new financial service of claims handling and settling.

The ASIC draft information sheet says AFS licensees must handle and settle insurance claims in a timely way; in the least onerous and intrusive way possible; fairly and transparently; and in a way that supports consumers, particularly those experiencing vulnerability or financial hardship.

On transparency and fairness, it says claimants must be kept regularly updated about the progress of their claims and given an explanation when a claim is rejected. They need to be informed of their rights to make a complaint and how to access internal and external dispute resolution avenues.

The regulator will issue the final information sheet and proof document, incorporating any changes to the legislation during passage of the Bill, ahead of the commencement of the reforms.

Consumer advocate the Financial Rights Legal Centre has commended ASIC for moving quickly to provide guidance to the insurance industry.

Director of Casework Alexandra Kelly also backs the move to regulate so-called storm-chasers, telling insuranceNEWS.com.au bringing them into the fold “should also give vulnerable communities hit by the next natural disaster some protection against any egregious behaviour by this small but growing sector.”

Click here for the ASIC draft information sheet.