One of the key regulatory reforms arising from the Hayne Royal Commission was for the management of insurance claims to be a licensed financial service, having previously been subject to an exemption. The Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Act), which received Royal Assent on 17 December 2020, has now done that. The legislation provides that any person providing claims handling and settling services for ‘relevant insurance products’ will be providing a financial service from 1 January 2022 but, more importantly, any person providing such services after 30 June 2021 will need to have applied for a new or varied Australian financial services licence (AFSL), or be using the services of an entity that has done so.
ASIC has now released Media Release 21-067 ‘ASIC warns time is fast running out for insurance claims handling AFS licence applications’ calling on insurance claims handling firms to lodge licence applications (new and varied) as soon as possible, and by no later than 7 May 2021. ASIC has stated in the Media Release that:
- Applications submitted after 7 May 2021 risk being rejected at the deadline of 30 June 2021 which is the legislative deadline to access transitional arrangements. (A person can provide claims handling and settling services without having made an application only up until 30 June 2021. After this time, a person may only continue to provide claims handling and settling services if a complete application for an AFSL or AFSL variation has been submitted by 30 June 2021).
- ASIC will reject an application if it is incomplete.
- Rejections occurring close to the 30 June 2021 deadline may mean that the applicant has insufficient time to rectify and re-submit their application.
What do you need to do?
Insurers, brokers and other entities involved at the various stages of insurance claims handling need to consider the impact of the claims handling reform by reviewing all steps in their claims procedures for each relevant insurance product.
Those entities which do not have an AFSL, but undertake claims handling and settling, will be required to either obtain an AFSL or become an authorised representative of an AFSL holder.
Existing AFSL holders will need to apply to ASIC to vary their licence to include claims handling before 30 June 2021. Insurers should also engage with any third parties used in claims handling and consider if they need an AFSL, or should become an authorised representative of an AFSL holder.
Providers will also need to address any likely changes in procedures, resourcing, compliance, training, disclosure, and supervision. Formalising policies and procedures which set out milestones and timeframes will be essential in order to complete the AFS licence or variation application.
Applying for an AFS licence or variation
We are here to help, and have worked with numerous companies on Australian financial services licensing applications and variations. We can assist unlicensed providers to apply for a new AFSL with a claims handling authorisation, or can work with existing AFSL holders to vary their existing AFS licence to include a claims handling authorisation.
We have a range of fixed fee options for AFS licence applications and variations that clients can choose from to assist them to meet ASIC’s deadlines.