Brokers who provide claims handling and settling services on behalf of insurers need to be licensed to do so under new laws passed in December, the National Insurance Brokers Association (NIBA) says, but other brokers will not be “caught” by the new regime.

The new laws – a Hayne royal commission recommendation – put an end to the exemption of claims handling and settling as a financial service under the Corporations Act.

NIBA provided the update to its members after liaising with Treasury in relation to the broadening of the insurance broker exemption as it related to the category of persons who would be caught by the Corporations Act in relation to claims handling and settling services when acting as a “claimant intermediary”.

The peak body says a “claimant intermediary” is defined as a person who carries on a business of representing an insured under an insurance contract for a reward.

“The end result is insurance brokers will only be caught by the new claims handling and settling services regime if acting on behalf of insurers in providing claims handling and settling services,” NIBA says.

Insurance brokers acting for insurers will need to identify if and when they may be providing a claims handling and settlement service on behalf of insurers and generally determine whether:

• they need to vary their Australian Financial Services licence for this service;
• they fall within one of the relevant exemptions; and
• they need to act as an authorised representation of a licensee or in another representative capacity.

Since the start of the year, claims handling and settling is a financial service that requires a licence by January 1 next year.

As part of the 12 month-transition to the new regime, firms that must hold an Australian Financial Services licence must lodge an application or variation request by June 30 in order to continue to provide claims handling and settling services, while the corporate regulator assesses their application.

Failure to submit a complete application by or on June 30 means a firm will be in breach of the laws if they continue to provide claims handling and settling services from July 1.