8 minute read
Representation
WE ARE YOUR VOICE! Lots still happening…
COVID-19
The Insurance Council of Australia, in consultation with AFCA and ASIC, commenced proceedings in the Supreme Court of NSW seeking clarification of issues relating to the interpretation of certain pandemic exclusion clauses which refer to the now repealed Quarantine Act. The proceedings have been heard by the Court, and at the time of writing the Court’s decision was pending.
The financial services regulator in the United Kingdom had commenced a test case in the UK courts seeking clarification of the pandemic exclusion clauses in a number of London market policies. An initial decision has been handed down by the Court, and it is understood both the regulator and a number of insurers have lodged appeals against that decision.
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.
FEDERAL Royal Commission Reforms
At the time of writing (mid November 2020) the series of Bills implementing the Royal Commission recommendations affecting general insurance have not been introduced into the Federal Parliament. NIBA is waiting to see the outcome of submissions lodged with the government earlier this year, and our discussions with treasury and others since that time.
Senate Bushfire Inquiry
The Senate Committee inquiring into the summer bushfires has released its report. The important role of insurance was noted by the committee, which indicated the performance of the insurance industry had been “exemplary”. The committee urged state and territory governments to review insurance taxes and levies in order to keep insurance affordable for as many people as possible.
Federal Bushfire Royal Commission
The Bushfire Royal Commission has also issued its report to government and has emphasised the need for much more preparation for natural disasters, and much greater efforts on the mitigation of risks and making communities more resilient. NIBA has been supporting this position for many years.
Small Business Ombudsman Insurance Inquiry
As recently advised, the Australian Small Business and Family Enterprise Ombudsman has commenced an inquiry into the availability and affordability of general insurance cover for SME businesses. Included in the inquiry is the role of brokers in getting the right coverage.
NIBA provided a detailed submission to the Inquiry and has met with the Small Business Ombudsman and her officials to discuss the role of insurance brokers, and current market conditions in relation to the supply and cost of general insurance cover.
It was pleasing to hear the Ombudsman has a good understanding of the role of insurance brokers (as a previous small business owner herself).
NIBA continues to liaise with the Ombudsman’s office in relation to this inquiry. A report is due before the end of 2020.
More information about the Insurance Inquiry is available at: www.asbfeo.gov.au/ current-inquiries/insurance-inquiry
Unfair Contracts Terms Legislation
As previously advised, legislation which will apply existing unfair contracts terms legislation to insurance contracts has been approved by the Federal Parliament. These reforms were recommended by the Royal Commission and by the ACCC Interim Report on Insurance Issues in Northern Australia.
It is important to note that implementation of this legislation has NOT been deferred by the Federal Government. The reforms will take effect in early April 2021. By that time all retail policies will need to be reviewed to identify and remove any potential unfair terms.
As noted above in relation to Design and Distribution obligations, where brokers have policies with their own wordings and cover, they will need to review the terms of cover and the wording of the policies to determine whether the policies might be caught by the Unfair Contract Terms legislation. This should be done in collaboration with the relevant underwriter. We also note that these are technical legal questions, and we strongly urge brokers to get legal support for this purpose.
Add-on Insurance Reforms
The Government has undertaken consultation on Royal Commission proposals to ban virtually all forms of general insurance sold at the same time as a non-insurance product (for example, travel insurance sold when a customer purchases an air ticket or an overseas holiday, or insurance taken out when a rental car is hired).
NIBA has provided a detailed submission to treasury indicating the proposed approach is far too wide. We have spoken with treasury on this recently and have been given an assurance that the main concerns have been taken into account in the drafting of the legislation.
NIBA will review the matter further when the Bill is tabled in Parliament.
Anti-hawking Reforms
One of the Royal Commission recommendations was to prohibit the hawking of financial
products. The Government has released draft legislation to implement this proposal.
NIBA is concerned that the recommendation as drafted is likely to seriously impair the ability of insurance brokers to properly advise their clients on their business or other risks, and their insurance needs and cover more broadly. This is because the proposed legislation restricts the broker to discussing the topic raised by the client, and only that topic.
NIBA has made a strong submission to the government to urge further consideration of this matter. Our position is that the insurance broker must be able to discuss any risk or insurance needs of the client at any time, in order to properly perform their function as the trusted adviser on risk and insurance matters.
Proposals to Restrict the use of the Terms “Insurance” and “Insurer”
The Royal Commission recommended clarification of the ability for ASIC to fully regulate funeral insurance, where serious misconduct had been identified. However, the government has taken a broader approach to extend restrictions on the use of the words “insurance” and “insurer”.
NIBA has provided a submission to treasury to challenge the government’s proposals, as they are not consistent with the Royal Commission recommendation in this area.
Last Resort Compensation Scheme
The Federal Government has published a consultation paper on the Royal Commission recommendation to establish a last resort compensation scheme.
This scheme is designed to respond to circumstances where AFCA makes an award against a financial services provider, but the provider has gone out of business and is unable to satisfy the award in favour of the client.
The government is committed to proceeding with this reform, and the NIBA Board has discussed the matter at length. NIBA has provided a submission to the government indicating our preferred approach for the funding of the scheme. We will provide further information when it comes to hand.
ASIC Product Intervention Powers
ASIC has released an updated Regulatory Guide relating to the proposed exercise of its Product Intervention Powers in relation to add-on insurance products sold by motor dealers.
NIBA continues to have discussions with ASIC in relation to a number of aspects of the product intervention powers.
Internal Complaints and Disputes
ASIC recently issued Regulatory Guide 271 – Internal Dispute Resolution. It is a condition of every AFS licence that the licence holder have a system for managing and resolving complaints and disputes, preferably before they are elevated to AFCA.
RG 271 reviews and updates ASIC’s requirements in this area. The new requirements take effect on 5 October 2021.
NIBA has provided a detailed overview of the new Regulatory Guide to members, and we strongly recommend all members review their internal complaints and disputes handling policies in order to ensure the new requirements will be implemented.
APRA
We again remind members that the person in every insurance broking firm responsible for providing data to APRA must review the new procedures set out on their website: www.apra.gov.au/apra-replacing-d2a
Every insurance broking firm should by now have made arrangements for a key manager to have myGovID credentials and to appoint a Relationhship Authorisation Manager, in order to be able to continue to provide relevant reports to APRA.
Information about myGovID is available at: www.ato.gov.au/General/Gen/myGovID/
Please note that the existing AUSkey arrangements were due to expire on 31 March 2020. New arrangements should have been in place prior to that date.
We again strongly urge all members to become familiar with the new requirements and start to develop procedures to implement the new system.
The NSW Government has launched a major review of workers compensation, including the operation and management of icare, and the operation of the NSW workers compensation scheme more broadly. NIBA has provided a submission to this review.
Review of NSW Home Warranty Insurance
NIBA has provided a submission to the Independent Pricing and Regulatory Tribunal inquiry into the NSW home warranty insurance scheme.
NIBA has also made representations to NSW icare in relation to the tender they are running for the provision of distribution services for home warranty insurance.
General Insurance Code of Practice
Any insurance broker operating under a binder on behalf of insurers will need to undertake training on the new Code of Practice and to implement procedures to adopt the General Insurance Code in respect of those operations. This is particularly important for the new Code provisions relating to vulnerable persons and clients in distress.
NIBA also believes that any insurance broker acting on behalf of their clients should have a good general knowledge of the insurer Code of Practice, especially the provisions regarding family violence and vulnerable customers.
The new General Insurance Code also contains new provisions dealing with insurance and mental health, disclosure of information and the sale of insurance products through motor dealers.
A summary of key features of the new General Insurance Code of Practice is available at: www.insurancecouncil.com. au/assets/media_release/2019/311019%20 Key%20features%20of%20the%20new%20 General%20Insurance%20Code%20of%20 Practice.pdf
Insurance Brokers Code of Practice
The review of the Insurance Brokers Code of Practice is continuing. The NIBA Board of Directors has largely completed detailed discussions in relation to the content of a new Code of Practice for insurance brokers.
NIBA will shortly seek the views of members on the operation of the Code of Practice, and the future development of the Code, taking account of what is happening in other areas of financial services, the recommendations of the Royal Commission, and the work being done by the Insurance Council of Australia in its review of the General Insurance Code of Practice.
CONTACT NIBA As always, brokers who have questions about these or any other government or regulatory matters should feel free to contact NIBA CEO Dallas Booth at: dbooth@niba.com.au
