AFS Licensed insurers, underwriting agencies, TPAs (insurance claim managers), general insurance brokers and claimant intermediaries must comply with the general obligations set out in Section 912A(1) Corporations Act. You must have measures for ensuring you comply with your obligations ASIC uses the expression ‘measures’ or ‘compliance measures’ to refer to your processes, procedures or arrangements for ensuring that, as far as reasonably practicable, you comply with your obligations as a licensee, including the general obligations (see RG 104.23-24). ASIC expects you too: (a) document your measures in some form; (b) fully implement them and monitor and report on their use; and (c) regularly review the effectiveness of your measures and ensure they are up to date Tip: For most licensees (other than APRA regulated insurers) a single, tailored (describing your business and your products/services & your obligations; & how these are managed), Risk & Compliance Manual is sufficient. The Manual should also include governance & breach management. Contact me for assistance. What are the general obligations? the financial services covered by the licence must be provided efficiently, honestly and fairly In INFO 253 ASIC provides insights into what this obligation means in context of claims handling & settling services. The principles can be provided to sales & underwriting. providing the financial services in a timely manner including meeting time frames and standards in the GI Code of Practice or Insurance Brokers Code of Practice providing the financial services in the least onerous and intrusive way possible providing the financial services fairly and transparently, and in a way that supports consumers, particularly ones who are experiencing vulnerability or financial hardship 2. have in place adequate arrangements for the management of conflicts of interest This means identifying conflicts of interests and managing them by: disclosure controlling (through key controls); and avoiding. All conflicts (& there management) should be included in a conflicts of interest register with training provided to employees and other representatives. 3. comply with the conditions on the licence The conditions on your AFS licence reinforce some of the general obligations, so breaching a licence condition will sometimes also be a breach of the general obligation that the condition relates to. You must have measures in place to manage your licence conditions including, for example, a key person requirement condition or for insurance brokers the use of restricted broker terms. 4. comply with the financial services laws Financial services laws is a wide concept and in addition to Corporations Act & ASIC Act includes any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial services. Financial services laws therefore relevantly includes: Insurance Contracts Act, Insurance Act and other Acts applying to APRA regulated insurers and the Privacy Act. 5. take reasonable steps to ensure that its representatives comply with the financial services laws This obligation requires licensees to train and […]
General insurance products are excluded from the conflicted remuneration obligations in respect of monetary or non-monetary benefits. However, from 9th July 2025, where personal advice is provided, or is likely to be provided, on general insurance products, the exclusion for monetary benefits only applies if the client’s informed consent to the monetary benefit has first been given. Refer: Corporations Act s963B(1)(a), s963BB, s963C(1)(a), and reg 7.7A.12G. Also refer ASIC RG 246 and INFO 292. what are the requirements? If you are a general insurance broker holding an AFS licence (or an [authorised] representative of a licensee) that receives monetary benefits (e.g. commissions) in connection with issuing or selling general insurance to a retail client while providing, or being likely to provide, personal advice to that client, you must: – obtain the client’s informed consent to receive the benefit before the insurance is issued or sold; – have the client’s written consent (or a copy of it), or a written record of any verbal consent that the client gave, and – as soon as practicable after the client provided informed consent, give the client a copy of the written consent, or a copy of the written record of the client’s verbal consent what does this mean in practice? The informed consent requirement applies to monetary benefits received by brokers from insurers (including underwriting agencies & Lloyds coverholders) given in connection with general insurance issued or sold after 9th July 2025 (including renewals after that date). if a broker is an authorised representative, the obligation applies to you in your capacity as an authorised representative. personal advice is financial product advice where the broker has considered one or more of the clients objectives, financial situation and needs or a reasonable person might expect the broker to have considered one or more of those matters. All other financial product advice is general advice. The informed consent requirement does not apply to monetary benefits given in connection with insurance issued or sold by AFS licensees and representatives if only general advice is provided or likely to be provided. If the situation involves both general advice and personal advice, the informed consent requirement applies to these benefits. The informed consent requirement does not apply to the giving of non-monetary benefits (e.g. education and training) to AFS licensees or representatives in connection with issuing or selling insurance. Note that AFSL general obligations ‘efficient, honest & fair’ and ‘conflicts of interest’ would apply to these arrangements especially if they are used to ‘disguise’ otherwise commission payments. This would also be misleading or deceptive conduct. If you are paid a monetary benefit without obtaining informed consent from your client, the monetary benefit you receive will breach the ban on conflicted remuneration. The consequences of breaching this ban could include a civil penalty, a banning order, or AFS licence suspension or cancellation. what must be provided to the client before they provide informed consent? Before a client can provide informed consent, you must disclose the following information to them: […]
‘Documentation helps you demonstrate whether or not you are complying with the general obligations.’ – ASIC RG 104.26 Insurers, underwriting agencies, TPAs, Lloyds coverholders, insurance brokers and claim service suppliers have a myriad of obligations to comply with. Compliance with your obligations, through your processes, procedures, systems and people are collectively known as your ‘compliance measures‘. Your compliance measures, together with your governance mechanisms, should work as an operating rhythm that manages your obligations in a systematic manner, incorporates changes, evolves as your business grows and responds to the external environment. The Risk & Compliance Manuals that I design and are tailored for my general insurance clients achieve this purpose, through the following: 1. Identifying the source of your obligations The source of your obligations are defined by: Who you are ? – an APRA regulated insurer holding an ASF Licence and who subscribes to the GI Code has different obligations to a NIBA insurance broker who is an authorised representative of a Licensee. Who do you act on behalf of? an underwriting agency or material service provider acting on behalf of an insurer or an insurance broker acting on behalf of a client? What do you do? – provide financial advice, issue general insurance products, provide a claims handling service or are a claims service supplier to an APRA regulated insurer How do you do it? – do you distribute direct or through brokers, do you sell through human interaction or automated processes, do you provide claims under your licence or through a TPA? Who are your clients? – retail or wholesale clients , consumer insurance contract or other insurance contracts. standard form contracts 2. Capture your obligations For my smaller-medium sized clients I capture obligations within their Risk & Compliace Manual, providing a single source document. Larger clients usually have a stand-alone obligations register. The manual or register should also include the source of the obligations (e.g., Section 912A(1)(a) Corporations Act or paragraph 21 GI Code of Practice), this enables the reader to deep-dive into the actual obligation when required. 3. Assign key controls This is the heart of ensuring your compliance measures are adequate. Key control(s) are assigned to each obligation, so that the obligation is managed within risk appetite. The focus of the Board, Senior Managers and Risk & Compliance Committee now shifts from the numerous obligations to a suite of more manageable key controls. 4. Test your key controls A key control that is not periodically tested is no control. Testing should incorporate (1) design effectiveness – is it fit for purpose? and (2) operational effectiveness – is it operating as intended? Gaps must be identified, reported and closed out in a timely manner. The gaps must be assessed for regulatory or Code breaches. You must have a control testing program. 5. Monitoring and reviewing your compliance measures Your compliance measures must be monitored on an ongoing basis. An effective risk & compliance operating rhythm generates data – incidents, complaints, control testing, file reviews, attestations, […]
The obligation One of the general obligations for AFS Licensees under Section 912A(1) Corporations Act is the ‘organisational competence obligation’. s912A(1)(e) ASIC assesses your compliance with this obligation by looking at the knowledge and skills of the people who manage your financial services business. ASIC refer to these people as your ‘responsible managers’. (refer RG 105) This is on ongoing obligation therefore it is important that your compliance measures, including how you comply with your obligations, are documented. How many responsible management should we nominate? At a minimum, you need to nominate responsible managers who: (a) are directly responsible for significant day-to-day decisions about the ongoing provision of your financial services; (b) together, have appropriate knowledge and skills for all of your financial services and products; and (c) individually, meet one of the five options for demonstrating appropriate knowledge and skills (refer Table 1 of RG 105). If you have a responsible manager with appropriate knowledge and skills for some, but not all, of your financial services or products, you need to ensure that your other responsible managers have appropriate knowledge and skills for the remaining services and products. The number of people you need to nominate as responsible managers will depend on the nature, scale and complexity of your business. However, ASIC expects that you will nominate at least two responsible managers. If you are heavily dependent on the competence of one or two responsible managers (e.g. in a small organisation with one or two principals), ASIC will generally impose a ‘key person’ condition on your AFS licence. Telling ASIC about your responsible managers You must demonstrate your organisational competence when you apply for an AFS licence. You may also need to demonstrate your organisational competence if you later apply to vary your licence authorisations. When you apply for an AFS licence, or to vary your licence authorisations, you must nominate your responsible managers in your application and answer questions about their role, training and experience, and which of the five options in they meet. You must also support your application with a ‘core proof’ demonstrating that your responsible managers: (a) individually meet one of the five options for demonstrating appropriate knowledge and skills; and (b) together have appropriate knowledge and skills to cover all of your financial services and products You must advise ASIC within 10 Business Days when you remove or add a responsible manager, refer the following link Changing your responsible managers If the responsible manager you are changing is named on your AFS licence as a key person, you must also apply to vary the key person condition on your licence. (Form FS03) If you need assistance with adding/removing responsible managers or varying your AFS Licence conditions, contact me. Obligations of a responsible manager The obligation for organisational competence applies to the licensee not the responsible manager with civil penalties applying for non-compliance however responsible managers may be subject to banning or disqualification orders for failing to fulifill their duties. The following cases are relevant […]