ASIC has remade a legislative instrument that exempts Australian financial services (AFS) licensees from appointing a general insurance product distributor as their authorised representative.
The ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2025/520 will extend the relief previously provided by ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2015/682 until 27 August 2030.
This promotes the wide availability of general insurance products to consumers by reducing the compliance costs to providers.
Criteria required to comply with the instrument
In order to rely on the instrument, and provide a financial service without the need to be licensed or appointed as an Authorised Representative of a Licensee, the following criteria must be met:
- the principal must hold an Australian financial services licence covering the provision of the service;
- the service is dealing in a general insurance product;
- the provider is a product distributor of the licensee (but this does not include employees of the licensee); and
- the distributor is not an authorised representative of the licensee.
Additional requirements when the general insurance products are distributed to Retail clients
The licensee must have taken reasonable steps to ensure that when the distributor provides the financial service to a retail client:
- the distributor draws the client’s attention to the availability of a dispute resolution system of the licensee that covers complaints by the client in relation to the financial service and how that system may be accessed; and
- if the distributor is dealing in a general insurance product or a bundled consumer credit insurance product, the client is given information in writing about:
- (a) who the distributor acts for when providing the financial service; and
- (b) any remuneration (including commission) or other benefits that the distributor, or an associate of the distributor, may receive in respect of, or that is attributable to, the provision of the financial service.
The Distributor must not provide financial product advice
The ASIC instrument only applies to ‘dealing’.
Dealing in a financial product within the meaning of s766C(1) Corporations Act (also refer RG 36 Part C) means:
- applying for or acquiring a financial product;
- issuing a financial product;
- varying a financial product; or
- disposing of a financial product.
Arranging for a person to engage in the conduct referred to above also constitutes dealing. Arranging refers to the process by which a person negotiates for, or brings into effect, a dealing in a financial product (e.g. an issue, variation, disposal, acquisition or application). The person who is arranging may be acting for a product issuer, seller or consumer.
As the instrument is restricted to ‘dealing’ only, this means that the distributor is not permitted to provide financial product advice, this restriction includes both general or personal advice. If the distributor requires authorisation to provide financial product advice, and the licensee is prepared to authorise the distributor to provide financial product advice, then the distributor must be appointed as an authorised representative of the licensee (or alternatively the distributor obtains their own AFSL).
Typical general insurance situations when the instrument may be relied on
Arrangements where a licensee may consider using the distribution instrument include an insurer or underwriting agency distributing general insurance products through:
- real estate agents (landlord insurance);
- travel agents (travel insurance); or
- accountants (tax audit insurance).
The licensee must monitor the distributor
As the distributor is a ‘representative’ of the licensee, the licensee must monitor the distributor and ensure the distributor’s ongoing compliance with:
- the requirements of the ASIC instrument; and
- that the distributor (and its staff involved in the general insurance product distribution) is trained and competent.
General Insurance Compliance workshop – Sydney 23rd October
I will be discussing general insurance product distribution arrangements, such as the ASIC distribution instrument, during my General Insurance Compliance Workshop in Sydney at The Grace Hotel on Thursday 23rd October.
Register here for tickets to the GI Compliance workshop
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