Apply for or Vary an AFSL to cover claims handling and settling
To date, the handling and settling of insurance claims has been excluded from being a financial service, under Chapter 7 of the Corporations Act. However, in recent years claims issues have become apparent in both life and general insurance; shining a spotlight on a regulatory gap that required addressing.
As a result, the Hayne Royal Commission recommended to bring claims handling and settling into the fold of Chapter 7, whereby it will be included in the definition of a financial service.
Claims handlers will be required to apply for a new or varied AFSL. Alternatively, claims handlers may operate as an Authorised Representative under another AFSL that has obtained the authorisation. The new authorisation also comes with an obligation to act efficiently, honestly and fairly when handling claims, as well as other general obligations.
ASIC has released an information sheet regarding the changes: https://asic.gov.au/media/5870905/draft-info-000-claims-handling-and-settling-1.pdf
Claims handlers can include a variety of service providers within the insurance industry:
- Insurance fulfilment providers - carry on a business of providing goods or services to satisfy an insurer’s liability to its insured and have authority from an insurer to reject all or part of a claim.
- Claims managers - provide a claims handling and settling service on behalf of one or more insurers.
- Claimant intermediaries - carry on a business of representing insured people in pursuing a claim and do so in return for any benefit which is given to you or a person nominated by you.
- Insurance brokers - carry on a business of arranging contracts of insurance for intending insureds and provide a claims handling and settling service on behalf of the insurer.
- Financial advisers - provide financial product advice to an insured person and provide a claims handling and settling service on behalf of the insurer.
CLAIM HANDLING ACTIVITIES
The activities that are captured under the new requirements are as follows:
- Making a recommendation or stating an opinion that could influence a decision whether to make an insurance claim;
- Assisting another person to make an insurance claim;
- Assessing whether an insurer is liable under an insurance product;
- Making a decision to accept or reject all or part of an insurance claim;
- Quantifying an insurer’s liability under an insurance product;
- Offering to settle all or part of an insurance claim; and
- Satisfying a liability of an insurer under an insurance claim.
Should you wish to discuss how this requirement affects your business, please contact 3Lines.