Compensation and insurance guidance released

The Australian Securities and Investments Commission (ASIC) has released regulatory guidance about the compensation and professional indemnity (PI) insurance obligations under the National Consumer Credit Protection Act.

Regulatory Guide 210 Compensation and insurance arrangements for credit licensees (RG 210) sets out how credit licensees can meet their obligation to have adequate compensation arrangements, according to ASIC. RG 210 was developed to help people understand how ASIC would administer these requirements.

ASIC Commissioner Dr Peter Boxall said RG 210 had been developed to help people understand how ASIC would be administering these requirements and to outline what will be ASIC’s expectations in relation to compensation and PI insurance.

“ASIC will administer the compensation requirements with the objective of reducing the risk that credit licensees cannot meet claims for compensation due to insufficient financial resources,” Dr Boxall said.

“Whether a PI insurance policy for credit licensees is adequate depends on the amount and scope of cover and the relevant terms and conditions of that policy.”

RG 210 provides ASIC’s view on what is ‘adequate’ PI insurance for the purposes of the National Credit Act, including the level and scope of cover that should be provided by a PI insurance policy.

“Industry and consumer stakeholders have made significant contributions to this guidance, and we thank them for their time and input into the consultation process,” Dr Boxall said. “We will continue to monitor the implementation of the new requirements in order to achieve a smooth transition for industry.”