Financial services laws are designed to protect consumers. The 1st layer of protection is the need to hold an AFS Licence.
Unless you are an AR of a Licensee or can rely upon an exemption you need to hold an AFS Licence to provide general insurance financial services:
๐๐๐๐๐ฃ๐๐ ๐๐ช๐ฉ๐๐ค๐ง๐๐จ๐๐ฉ๐๐ค๐ฃ๐จ
The 3 authorisations relevant for GI are:
1 Providing financial product advice, this may be restricted to general product advice;
2. Dealing in general insurance products by:
- Issue, apply for, acquire, vary or dispose of; and/or
- Apply for, acquire, vary, or dispose of on behalf of another.
3. Provide a claims handling & settling service.
to Retail &/or Wholesale clients.
๐๐๐๐ฉ ๐๐ช๐ฉ๐๐ค๐ง๐๐จ๐๐ฉ๐๐ค๐ฃ ๐๐ค ๐ฎ๐ค๐ช ๐ฃ๐๐๐?
APRA-regulated insurers – although authorised by APRA to carry on insurance business in Australia, insurersย require an AFS Licence when providing financial services unless relying upon the Wholesale client exception.
Insurers generally need all 3 authorisations although dealing is limited to the issuing authority & the claims authorisation does not include representing a person making a claim.
Underwriting Agencies – depending on their binder/agency agreement will generally require the same authorisations as insurers. If the MGA places the business in the open market (ie not under a binder) they will require the dealing authorisation ‘on behalf of another’.
Insurance brokers – require financial product advice & dealing on behalf of another authorisation only. Brokers can rely on the claims exemption provided they arranged the contract of insurance or are acting under a letter of appointment. Brokers also require the Licence condition permitting them to use the restricted terms associated with insurance broking.
TPAs – will require the same claim authorisations as insurers, as the TPA acts on behalf of insurers as an ‘Insurance claims Manager’.
Claimant Intermediaries act on behalf of insureds & will require a Claims authorisation limited to making a recommendation; assisting & representing a person making a claim.
Claim Service Suppliers & insurance fulfilment providers, acting on behalf of insurers, generally do not require a licence as they can rely on exemptions. In these cases it’s necessary to examine the authority they have from insurers/MGA.
๐๐๐๐ฉ ๐๐๐ฅ๐ฅ๐๐ฃ๐จ ๐๐ ๐ฎ๐ค๐ช ๐ฅ๐ง๐ค๐ซ๐๐๐ ๐๐๐ฃ๐๐ฃ๐๐๐๐ก ๐จ๐๐ง๐ซ๐๐๐๐จ ๐ฌ๐๐ฉ๐๐ค๐ช๐ฉ ๐ ๐๐๐๐๐ฃ๐๐?
It is an offence to provide financial services without a licence (or acting as an AR or relying on an exemption). It is also an offence to hold out that you hold an AFS Licence if you do not.
Ensuring that you hold the correct AFS Licence authorisations & conditions is critical when providing (or intending to provide) financial services in Australia.