The Insurance Council of Australia (ICA) is working closely with the National Insurance Brokers Association to find a long-term solution for broker clients as the nation prepares to ditch cheques. 

The industry will consider issues around access and maintenance of up-to-date customer contact and payment details, and secure storage of personal information, ICA CEO Andrew Hall says. 

He made the comments in a submission to a Treasury consultation paper launched after the Government announced in 2022 that it is closing Australia’s cheque system by 2030. 

Insurers are already taking steps to replace cheques for retail customers.  

Mr Hall says completion of the transition will vary across insurers, but with banks reducing cheque services from this year, ICA members are aiming for “implementation by 2024 rather than 2026, as cheque access and services provided by banks may vary during the transition”.  

Treasury has acknowledged there are some entrenched uses of cheques in the insurance sector, as intermediaries hold bank account details that insurers may not have access to, and cheques are “often the only practical manner” to refund customers. 

Settlement options on some claims will be limited to gift cards or electronic transfers following the discontinuation of cheques. But an insurer’s ability to settle with gift cards is restricted due to anti-money laundering regulations, the ICA’s submission says. 

“We suggest that customers may benefit from a less restrictive choice of non-electronic settlement if additional flexibility can be provided to insurers during this transition period.”  

Mr Hall says phasing out cheques will also create difficulties processing claims and policy cancellation payments, and fast payments to customers in urgent financial need. 

“The challenges will be acute for remediation payments, as it is less likely that an insurer will have up-to-date contact details of these impacted customers relative to those who have initiated a claim or cancellation with their insurer,” he said. 

Claims handling may be slowed because subpoenas and freedom of information requests require cheques to obtain information necessary for claims assessments.  

Ditching cheques as early as this year means insurers may not be able to process such requests to facilitate claims handling “even if governments provide a grace period”, Mr Hall says. 

“Similarly, some entities such as hospitals prefer receiving payments in the form of cheques for workers’ compensation claims ... We urge governments across the country to review government use of cheques and co-ordinate a response to facilitate an orderly transition.” 

ICA expects an increase in enquiries and insurance unclaimed monies being forwarded to relevant bodies, and says industry and government will need to collaborate closely to ensure a smooth transition. 

See the ICA submission here.