Insurers and claim-related parties may look to merge under one AFSL

Insurers insurance merger AFSL Australian financial services license compliance costs the fold legal claims Financial Services finity Royal Commission RC insurance claims statement of claims settlement options cash settlements financial advice life insurance life insurance retail products ASIC australian securities and investments commission

20 December 2019
| By Jassmyn |
image
image
expand image

Retail insurers may expect loss assessors and insurance fulfilment providers to obtain their own Australian Financial Services License (AFSL) as a result of the corporate watchdog looking to regulate claims handling as a financial service, according to The Fold Legal.

An analysis in conjunction actuarial and analytics consulting firm, Finity, said this would be instead of insurers appointing a large number of authorised representatives.

“As a result, we may see the emergence of groups comprised of these entities getting together under one AFSL to share the compliance costs and burden,” The Fold Legal said.

The regulation came out of the Hayne Royal Commission in a recommendation that insurers should have a duty to handle claims “efficiently, honestly, and fairly”.

This would see many businesses that handled and settled insurance claims for retail clients including technology providers needing to be licensed as an AFS licence holder, or appointed as an authorised representative, the analysis said.

New disclosure obligations would also apply including the requirement to give a Statement of Claims Settlement Options with offers of cash settlement.

Insurers, underwriting agencies with delegated claims authorities and brokers acting under a claims binder, and third part claim managers and administrators, loss assessors and loss adjusters, insurance fulfilment providers that have the authority to reject all or part of a claim, and those who provide financial advice to an insured about whether to accept a claim or claims settlement option would need an AFSL.

“If a provider acts for multiple insurers, the cross-endorsement consent process will apply if they wish to be authorised as a representative for more than one insurer,” The Fold Legal said.

“ASIC has not yet released information about how it intends to manage the licensing process and what other information needs to be submitted beyond the standard licensing application requirements. We anticipate that ASIC guidance will cover how applicants can demonstrate the competencies of their proposed responsible manager in support of the claims handling authorisation.

“These reforms present some challenges for insurtechs and raise the question of how they will fit into this new regime. Whether they will need to be licensed will depend on what function their technology actually performs in the claims process and whether the technology means the business as the platform provider has any delegated claims handling authority.”

The changes would apply from 1 July, 2020, to all general and life insurance retail products. This excluded health insurance, CTP, or workers compensation. The Fold Legal noted that it expected guidelines from the Australian Securities and Investments Commission (ASIC) to be released in the first quarter of next year.

Finity said that insurers and their services providers in the lead up to the changes needed to review:

  • Which of their activities and functions fall under claims handling and settling;
  • Would they require specific ASIC authorisation, or be exempt;
  • Is it better to obtain an AFSL, or to become an authorised representative;
  • What are the general and specific obligations that they will need to fulfil e.g. training;
  • Are the systems, processes and people up to the standard required for providing claims handling and settling services efficiently, honestly and fairly; and
  • What are the governance structures and processes with respect to claims handling, including capturing complaints, breaches and addressing poor customer outcomes.
Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

James Patterson

How much did IRESS pay Deloitte for this analysis? Not sure they are the arbiter of intelligent forecasting in this spac...

22 hours ago
Howard Elton

Article makes no comment that the advisers leaving industry are older and have many years of work an life experience w...

2 days 5 hours ago
Peter Robinson

This article appears to overlook the fact that there must be a fairly large group of advisers who missed out on the expe...

2 days 5 hours ago

ASIC has secured travel restraint orders against a financial adviser while he is the subject of an investigation into alleged financial misconduct....

4 days 23 hours ago

Insignia Financial has unveiled a new operating model and executive team, including a new head of advice, while three senior executives are set to depart the licensee....

2 weeks 2 days ago

Analysis by Chant West of the annual performance of growth superannuation funds has uncovered which ones see the best performance....

1 week 2 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Ardea Diversified Bond F
144.00 3 y p.a(%)
3
Hills International
63.39 3 y p.a(%)