NEWS / Representation
WE ARE YOUR VOICE!
There is a lot happening at the present time. The following are the key developments all insurance brokers need to be aware of. As noted in the CEO column, now is the time for all insurance brokers to become familiar with Royal Commission and other reforms which take effect this year.
COVID-19
The Insurance Council of Australia (ICA) has sought leave to appeal to the High Court of Australia in relation to the business interruption test case that was undertaken in the Supreme Court of NSW. The ICA has also commenced a second test case which will examine a number of policy wordings and has provided an update on business interruption matters generally, which is available here: insurancecouncil.com.au/ issues-submissions/bi-test-case NIBA continues to provide information to members in relation to government support for business, and the continuation of restrictions on community activity for health protection reasons.
ACCC NORTHERN AUSTRALIA INSURANCE INQUIRY
The ACCC has released its third and final report under the Northern Australia Insurance Inquiry. The report makes a number of recommendations, most of which are likely to have limited if any impact on the availability and affordability of home, contents and strata insurance in northern Australia. The final report repeated an earlier recommendation that insurance broker commissions be abolished. NIBA has spoken with the Federal Government in relation to this issue, and understands the government remains committed to the 2022 review of remuneration arrangements for general insurance products and services. NIBA is preparing for that review and is finalising a formal response to the ACCC report.
FEDERAL
Royal Commission Reforms
Legislation implementing several Royal Commission recommendations passed the Federal Parliament prior to Christmas and
8 / INSURANCE ADVISER APRIL 2021
will take effect during the course of 2021. The key provisions of interest to insurance brokers are as follows: Use of the terms “insurance” and “insurer”: there are now stronger provisions which prevent use of the word “insurance” for products and services that are not insurance. Care will need to be taken to ensure this word is not used in relation to the provision of non-insurance services, such as risk management advice. Also, do not call yourself an insurer if you are not APRA authorised or are otherwise able to act as an insurer in Australia. Insurer avoidance of life insurance contracts: changes affect the ability of a life insurer to avoid contracts of life insurance in certain circumstances within three years of entering into the contract. Life risk brokers need to become familiar with this provision. Caps on commissions for products sold in conjunction with the sale or long term lease of motor vehicles: new provisions give ASIC the power to set caps for commissions paid in relation to a number of add-on risk products including tyre and rim insurance, mechanical breakdown insurance, consumer credit insurance and some others. Those involved in this area will need to monitor ASIC activity in this area. Claims handling and settling services: these reforms make insurance claims handling and settling services a financial service, and therefore they must operate under a financial services licence and be subject to the requirements of Chapter 7 of the Corporations Act. It is important to note that any insurance broker who has authority to make decisions in relation to claims must discuss the matter
with the relevant insurance company and must take steps to either get a claims handling endorsement on their AFS licence or become an authorised representative of the insurer. NIBA has provided detailed information to members in relation to these provisions. Reference Checking and Information Sharing: new provisions require an AFS licence holder to comply with new reference checking and information sharing protocols to be released by ASIC. These requirements will apply to authorised representatives of life risk brokers, and do not apply to representatives giving advice only in relation to general insurance products. The new rules take effect on 1 October 2021. Breach reporting and remediation: detailed new laws in relation to breach reporting and remediation take effect on 1 October 2021. All member principals will need to thoroughly review their breach monitoring and reporting processes and procedures to take account of the new laws. NIBA will provide detailed information on this shortly. Hawking of financial products: complex new provisions relating to the “hawking” of insurance products will take effect on 5 October 2021. The provisions do not apply when an insurance broker is giving personal advice to a retail client, but they will apply to insurance brokers operating under a general advice model. The definitions and concepts are difficult and complex, and NIBA will provide further information to members in relation to these changes. Deferred sales model for add-on insurance products: these reforms
