NEWS / Upcoming Regulatory Changes
UPCOMING REGULATORY CHANGES
October is fast approaching and with it a raft of sweeping regulatory changes that all brokers need to be aware of. These changes will affect almost every broker, so it is critical that NIBA members have a thorough understanding of the changes and the impact they will have on their business.
Claims handling as a financial service: These reforms make insurance claims handling and settling services a financial service; therefore, these activities must operate under an Australian Financial Services (AFS) licence. Those insurance brokers acting for insurers need to identify if and when they may be providing a claims handling and settlement service on behalf of insurers and discuss the matter with the relevant insurance company and must take steps to either obtain a claims handling endorsement on their AFS licence or become an authorised representative of the insurer. Brokers who have authority to provide these services but act on behalf of the client while doing so, will be exempt from the new regime under the claimant intermediary exemption. This is the last opportunity for brokers caught by the regime to apply for a variation. Brokers have until 30 June to apply to ASIC for a variation of their AFS licence, after which a transition period will commence from 1 July to 31 December. During this time claims handing and settling services can only be provided if a complete application was lodged by 30 June, and it has either been granted or is still pending. From 1 January 2022 claims handling and settling services can only be provided if the application has been granted or if
the insurance broker is covered by the claimant intermediary exemption. It is important for members to note that ASIC may reject applications if they do not contain sufficient information or are incomplete. Rejections occurring close to the deadline may mean that the applicant has insufficient time to rectify and re-submit their application before the cut-off date. NIBA has previously provided information to its members on this issue, which can also be accessed from the Media Hub on the NIBA website under “Members only content”.
It is important for members to note that ASIC may reject applications if they do not contain sufficient information or are incomplete.
Hawking of financial products: Complex new provisions relating to the “hawking” of insurance products will take effect on 5 October. The provisions do not apply when an insurance broker is giving personal advice to a retail client,
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Reference Checking and Information Sharing: The new provisions will require AFS licence holders to comply with new reference checking and information sharing protocols which will shortly 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. Breach reporting and remediation: Detailed new laws in relation to breach reporting and remediation take effect on 1 October. All member principals will need to thoroughly review their breach monitoring and reporting processes and procedures prior to this date to ensure the policies and processes are compliant.
but they will apply to insurance brokers operating under a general advice model. The provisions will prevent the unsolicited marketing and sale of financial products to retail clients. The definitions and concepts are difficult and complex, NIBA is currently seeking clarity from Treasury and will provide further information to members in relation to these changes. Duty to take reasonable care not to make a misrepresentation: These reforms relate to a newly defined category of “consumer insurance contracts”. They apply to insurance obtained wholly or predominantly for the personal, domestic, or household purposes of the insured. Where the new definition applies, the insured only has a duty to take reasonable care not to make a misrepresentation to the insurer before entering the consumer insurance contract. The changes relate to insurance contracts entered into on or after 5 October. For non-consumer insurance contracts, the existing provisions in sections 21 and 22 of the Insurance Contracts Act (duty of disclosure obligations and misrepresentation provisions) apply. NIBA will provide more information on these reforms to members. Design and Distribution legislation: The new legislation requires every financial services product covered by the regime to have a corresponding ‘target market determination (TMD)’. The products captured under the regime include all products that currently require a Product Disclosure Statement. It is crucial that broker firms who use “broker wordings”, or their own schemes –
