I continue to receive questions from general insurance brokers on the difference between general advice and personal advice. Personal advice is where the provider of the advice has considered one or more of the person’s objectives, financial situation and needs or a reasonable person might expect the provider to have considered one or more of those matters. (my emphasis) It is important to note that general advice is narrow in application and ASIC and the Court will adopt an approach of ‘substance over form’ as to whether general or personal advice has been provided. That is, providing a general advice warning does not mean that financial product advice is general advice per se, an examination of the facts and circumstances is required. This question was revisited by the High Court of Australia Westpac Securities Administration Ltd v Australian Securities and Investments Commission [2021] HCA 3. Also refer to ASIC media release 21-013MR Corporations Act Section 766B(3)(b) of the Corporations Act 2001 (Cth) defines “personal advice” so as to include “financial product advice” given or directed to a person in circumstances where a reasonable person might expect the provider to have considered one or more of the person’s objectives, financial situation and needs. Section 766B(4) defines “general advice” as financial product advice that is not personal advice. As the High Court stated [T]he division of the universe of financial product advice into “personal advice” and “general advice” serves to organise the obligations owed by a financial product adviser to a retail client, with more onerous obligations being imposed upon the adviser where the circumstances are apt to suggest to the client that the financial product, the subject of the advice, is appropriate to the particular circumstances of the individual client. Circumstances Westpac Bank subsidiaries, Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM), conducted two telephone campaigns by the Westpac companies which recommended that customers roll out of their other superannuation funds into a Westpac-related superannuation account. As a result of the campaigns, Westpac increased its funds under management by almost $650 million between 1 January 2013 and 16 September 2016. The High Court confirmed that WSAL and BTFM breached financial services laws, including the requirement to act in their clients’ best interests and the requirement to act honestly, efficiently and fairly. The unanimous High Court judgment upheld the Full Federal Court decision regarding the conduct of WSAL and BTFM, dismissing their appeal and holding that they breached the Corporations Act by providing personal financial product advice in calls made to 14 customers. Neither company was licensed to provide personal financial advice. Judgment In the judgment, Justice Gordon reinforced that s766B(3) of the Corporations Act, which outlines the meaning of general and personal advice, ‘is directed to the protection of the retail client’ and clarified that ‘[…] the general advice warning must be assessed in light of all the circumstances. The general advice warning was given only once, at the beginning of the telephone conversation. Members were subsequently asked […]
AFS Licensee’s must; have a dispute resolution system (process) that complies with standards and requirements made or approved by ASIC and covers complaints made by [retail] clients in connection with the provision of the financial services; and, be a member of AFCA. (refer s912A(1)(g) and (2) Corporations Act). The licensee’s IDR must include complaints against representatives including authorised representatives. It follows that authorised representatives must immediately notify the licensee about the complaint. In addition, subscribers to the GI Code of Practice and Insurance Brokers Code of Practice must comply with parts 11 and 9.0, respectively. Understanding the nuances of RG 271 – enforceable paragraphs The general obligation for IDR in section 912A(1) gives rise to a legal obligation imposed on the Licensee. However, the legal requirement only applies to the enforceable paragraphs in RG 271and not all paragraphs RG 271. Any paragraph that is not identified by ASIC as an ‘enforceable paragraph’ in RG 271 is regulatory guidance only and not a legal requirement. (refer RG 271.8 and RG 271.9) What are the enforceable paragraphs of RG 271 for general insurance? definition of complaint RG 271.27 – RG 271.29 (including note) posts (that meet the definition of ‘complaint’ set out in RG 271.27) on a social media channel or account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable RG 271.32 small business complaints RG 271.36 outsourcing IDR processes RG 271.48 what an IDR response must contain RG 271.43- RG 271.54 (including notes) when an IDR response must be provided by RG 271.56 – RG 271.60 (including note) complaint management delays RG 271.64- RG 271.66 (including notes) complaints closed within five business days of receipt RG 271.71 IDR response within 5 business days RG 271.75 the role of customer advocates RG 271.109- RG 271.110 (including note 1) links between the IDR process and AFCA RG 271.111- RG 271.112 how to manage systemic issues RG 271.118- RG 271.120 (including note) accessibility of IDR process RG 271.134 no charges or detriment RG 271.141 resourcing and staff numbers RG 271.142 – RG 271.143 empowering staff and financial delegations RG 271.146- RG 271.147 maximum IDR timeframes and closing complaints RG 271.163 and RG 271.165 policy and procedures RG 271.172 data collection, analysis and internal reporting RG 271.179 report complaints data internally and publicly RG 271.183 Disclaimer: Reproduction of statements made in this article by media outlets, whether in full or in part, is strictly prohibited without the written express consent of the author. The views, opinions, and positions expressed within this article are those solely of the author and Compliance Advocacy Solutions Pty Ltd and not the views of other individuals, companies or organisations they may be affiliated with. The author and Compliance Advocacy Solutions Pty Ltd make no representations as to accuracy, completeness, currency, suitability, or validity of any information in this article and will not be liable for any errors or omissions or any loss or damage arising from […]
I’m often asked to outline what is involved in obtaining an AFS Licence in Australia for general insurance. I have assisted many people to obtain a new AFS Licence, vary an existing Licence and add new responsible managers. The process to obtain an AFS licence to provide general insurance services or products is not overly complex however, it is time-consuming and labour-intensive, as ASIC’s information requirements are specific. All AFS licence applications (new and variations) must be submitted via ASIC’s online regulatory portal. I assist my clients in setting their business up in the portal and providing me with access so that I can facilitate the application for them. My typical clients requiring a new AFS licence include: insurance brokers who are currently authorised representatives; people who want to operate an Underwriting Agency in Australia (including Lloyds coverholders); foreign companies that want to provide financial services in Australia; and people wanting to provide claim services either for insurers (insurance claim managers) or insureds (claimant intermediaries) I manage AFS Licence variations (including adding responsible managers) for insurers, brokers, underwriting agencies, claim service providers and anyone who currently has an AFS Licence for general insurance products Typical general insurance authorisations AFSL authorisations relevant for general insurance are: providing financial product advice including general financial product advice only; dealing including issuing (when acting on behalf of insurers) and dealing on behalf of another person (insurance brokers including obtaining the use of restricted broker terms); and claims handling and settling services on behalf of insurers or on behalf of an insured. The financial services can be provided to Retail and/or Wholesale clients. The AFS Licence application process The process for a new AFS Licence application is more involved and complicated than a licence variation. This example deals with a new AFSL application however I can assist you with information requirements and the process for variations on request. Contact me here ASIC provides guidance on the process and information requirements in RG 1 and INFO 294. People requirements Information must be provided to ASIC on your fit and proper people and your responsible managers. Fit and Proper people Section 913BA of the Corporations Act requires that, before a licence is granted, ASIC must be satisfied that there is no reason to believe that certain people involved in the management or control of your financial services business are not ‘fit and proper persons’ to undertake that role. You will need to include details of your fit and proper people in the application (refer RG 1.138 – 1.166). A fit and proper person is your ‘officers’ and this is defined in section 9 Corporations Act, relevantly to include: a director or secretary of the corporation; or person: (i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (ii) who has the capacity to affect significantly the corporation’s financial standing; or (iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act […]
Typically, for home building claims, a cash settlement payment is offered as a settlement option when a repairer can’t guarantee repairs due to concurrent wear & tear or maintenance issues. Under paragraph 86 of the GI Code of Practice, insurers who have authorised repairs must accept responsibility for the quality of the builders work and the materials they use. This clause has led to an unfair practice of offering cash payments as a first resort. Most customers aren’t aware of their rights at law and under the GI Code, and simply accept the cash settlement offer. Problems arise when repair costs escalate (due to the rising cost of living or petrol cost increases and commensurate impact on supply chain) and the risks associated with project managing repairs. The standard claims settlement process appears to be that whenever there is a mix of covered damage and damage caused due to wear and tear or lack of maintenance, there is a default to a cash settlement payment. This position is difficult to reconcile when the same builder (under the guise of an expert report) has clearly been able to distinguish between storm damage and wear & tear/maintenance and provides a causation report. Most consumers don’t want the inconvenience of having to arrange repairs, coordinate trades and generally project management the work. A simple solution would be to provide the customer with the option of being provided with a detailed Scope of Works itemising insurance covered work and excluded work. The Code guarantee would be provided for the insurance covered work with the customer acknowledging their liability and payment for excluded work. Regulatory view of cash settlements (and cash settlement fact sheets) Cash settlements and cash settlement fact sheets (CSFS) remain on the radar of regulators. ASIC We will review general insurers’ use of cash settlements to better understand the practices and disclosures surrounding the offers being made and to assess whether there are risks of consumer harm. ASIC Corporate Plan 2025-2026 Code Governance Committee As part of our 2024-25 workplan, we committed to reviewing the information insurers provided to customers on cash settlements and the processes they follow when deciding to offer a cash settlement. We note that, in the Industry Action Plan, insurers have committed to a range of actions to address recommendations relating to cash settlements. We also note ASIC’s recent report, finding that insurers need to provide better information to consumers around cash settlements. We will review what information insurers provide to customers, and what information those customers need to make effective decisions around cash settlements. CGC Priorities 2025-26 Cash Settlement Fact Sheets An insurer, underwriting agency or TPA acting on behalf of either must provide a cash settlement fact sheet where: the financial service is claims handling and settling; and the service is offering to settle all or part of a claim under a general insurance product using a cash payment; and the customer is a retail client; and the PDS provides repair or replacement as settlement options. […]
I’m often asked when must a certain document be provided to a client? Disclosure documents for general insurance generally have have 2 requirements: content requirements; and timing requirements This article will focus on the timing requirements. Customer/client journey The simplest way to think about the timing requirements for disclosure documents is to think about the various customer touchpoints or the customer journey. Insurance brokers often send an important noticedocument when invoicing clients containing all relevant information such as FSG, general advice warning, duty to take reasonable care, duty of disclosure etc. While convenient, care should be taken with this approach to ensure the regulatory timing requirements are met Code requirements Brokers and insurers (including underwriting agencies, TPAs and other material service providers) also have requirements under respective industry Codes to provide certain information at a specific time. The customer/client journey should not only be mapped out to cover regulatory disclosure documents but should also pick up Code requirements such as providing a Terms of Engagement (brokers). The regulatory disclosure cycle It should be noted that disclosure documents are only required to be provided to Retail clients however it is common practice for a FSG to be provided to both retail and wholesale clients. A TMD is not a disclosure document as it only must be made available by a product issuer before it distributes a general insurance product. The product issuer must make a TMD available and a distributor must not engage in retail product distribution conduct unless a TMD is available or not required (see RG 274). It’s important to note that a TMD is not only relevant for Retail clients. The test is whether a Retail client could purchase the product, even if intended for Wholesale clients. Let’s explore the disclosure documents relevant for general insurance based on the customer experience or journey. I’ve included the reference in the Corporations Act for the content requirements in case you wish to have a look at these requirements in addtiion to the timing requirements. FSG Obligation to give a FSG if financial services provided to a Retail client (s941A for licensees and s941B for authorised representatives) Timing of FSG (s941D) Content requirements (s942A – 942E including a combined FSG/PDS) A FSG must be given to the (retail) client as soon as practicable after it becomes apparent that the financial service will be, or is likely to be, provided to the client, and in any event must be given to the client before the financial service is provided. (s941C provides situations in which a FSG is not required). Practically speaking, the FSG will be provided before any financial product advice is provided, this means on appointment (for brokers) or at quote stage (for underwriters). A claimant intermediary must provide a FSG before they provide any claims handling settling services to the client (s941C(7A)). This is because they are acting on behalf of the insured. A claims manager, acting on behalf of the insurer, is not required to provide a FSG, as […]
In 2024, ASIC reviewed 11 general insurers to understand how they are supporting customers who make a complaint. ASIC’s review focused on how general insurers are complying with select enforceable obligations in Regulatory Guide 271 Internal dispute resolution (RG 271). While ASIC’s review focused on general insurers, the findings in this report are relevant for all financial firms that must comply with RG 271, this includes Underwriting Agencies, Claim Managers (TPAs), Claimant Intermediaries and Insurance Brokers. ASIC‘s key findings included: Insurers failed to identify 1 in 6 customer complaints Insurers only identified 85 systemic issues from over 1.4 million complaints Insurers had immature systems for handling complaints and reporting on complaints 1 in 8 IDR responses for rejected complaints did not meet mandatory content requirements 1 in 5 delay notifications failed to meet mandatory content requirements All insurers failed to provide delay notifications within required timeframes The General Insurance Code Governance Committee highlighted complaints handling as a main priority for 2025-26. Respondents to our consultation raised significant concerns about how insurers identify and handle complaints. We raised our own concerns about the handling of complaints in our Industry Data and Compliance Report FY24, with the number of complaints increasing by 18%. The Insurance Brokers Code Compliance Committee in their Annual Report 2024-25 found 42% of brokers reported no breaches or complaints (that) suggests continued underreporting and issues with internal monitoring… These failures represent service gaps that can expose clients to risk. Regulatory requirements AFS Licensees, as part of their general obligations (refer s912A(1)(g) and (2) Corporations Act) must have a dispute resolution system that consists of: an internal dispute resolution (IDR) procedure that complies with the enforceable paragraphs of RG 271; covers complaints against the licensee (and representatives) in connection with the provision of the financial services; and be a member of AFCA. All AFS Licensees that provide financial services to retail clients must submit an IDR report to ASIC. Firms must submit an IDR report to ASIC every six months. The reporting periods are: 1 January to 30 June, and 1 July to 31 December. A two-month submission window opens at the end of each reporting period. Submission windows are: 1 January to end of February, and, 1 July to 31 August. Financial firms that had complaints during the relevant six-month reporting period must submit an IDR report through ASIC’s Regulatory Portal that contains an IDR data file in machine-readable format, consistent with the specifications in the IDR data reporting handbook. In a recent media release, ASIC has confirmed that it will proceed with plans to publish IDR data at firm-level. The IDR dashboard will be published later this year. Code Complaint requirements Part 11 of The GI Code of Practice applies to Retail Insurance products. In addition, it is available to an uninsured person making a claim against a customer who is insured under a Retail Insurance policy (see paragraph 60). Part 11 also applies to Wholesale Insurance products where you are entitled to Financial Hardship support under […]
Compliance training in general insurance is not only a legal and Code requirement, it is also necessary to ensure that you have adequate compliance measures and for an individual’s growth and development as they progress through their insurance career. Compliance training for front-line staff, compliance teams, responsible managers and boards is one of the core compliance services that I offer to my clients. Over the years, I have identified what works. How do you know whether your compliance training has been successful? The measures of success Some of the metrics that can be adopted to measure the success of your compliance training are: a sustained increase in the number of incidents and complaints being identified and reported internally; an increase in the level of complexity of compliance questions being asked by front-line staff; a decrease in issues that were previously identified as pain points; a desire to attend future compliance training; better customer conversations (as assessed by monitoring); feedback from post-training surveys aimed at engagement and knowledge retention; and an increase in the maturity of compliance discussions within business team meetings. Importantly, some metrics that should not be used to assess the success of your compliance training are: the number of CPD/CIP points attained or annual hours of training completed. ; and the cost of training per employee. However these metrics are useful for other purposes The key requirements to conducting successful compliance In my professional experience, the following are some of the strategies that I adopt to ensure successful compliance training outcomes: Target the audience – training on financial services laws is not a one size fits all approach. Training for front-line staff differs to training for senior management, responsible managers or the board. Similarily, training must be tailored for different groups such as IDR teams, Authorised representatives, claims staff, sales & underwriters, onshore teams v offshore based teams. Understanding the lens of your audience is critical in how you poistion the same topic but to different audiences. For example RG 271 training for a mature IDR team will be different to complaints training for front-line customer service and claims teams. Fun and engaging – when an invite to a compliance training session pops in to your diary it may not necessarily generate your enthusiasm especially when accompanied by the dreaded words ‘attendance is compulsory.’ I consider that I have a training duty to ensure that the time that a person spends with me is of value and justifies them spending time away from their important day-to-day job (which continues even in their absence). Reading through the verbiage of s912A(1) Corporations Act may not be everyone’s cup of tea however, ensuring that s912A(1) is presented and discussed in a fun and engaging manner through, for example, story telling and case studies will faciliate learning as part of an overall enjoyable experience; Story telling – story telling brings compliance to life. I have 40 years experience in general insurance and in the last 8 years (as Compliance Advocacy Solutions) have […]
Misleading or deceptive regulatory obligations The Corporations Act prohibits engaging in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive (s1041H). Further, under the the ASIC Act, a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive (s12DA). A breach of the misleading or deceptive conduct provisions is a Reportable Situation to ASIC unless: the breach has been rectified including consumer remediation within 60 days; and the number of impacted consumers is less than 10; and the total financial loss or damage to consumers is less than $1000. If a breach satisfies all these thresholds, it is not deemed reportable to ASIC. What is misleading or deceptive conduct? The key requirement is that the impugned conduct leads, or is likely to lead, a person into error. Advertising financial products and services (including insurance): Good practice guidance ASIC has developed good practice guidance (RG 234) to help promoters comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct. The promoter will sometimes be the insurer, underwriting agency or broker but can also be a distributor or agent. ASIC’s guidance applies to advertising communicated through any medium in any form, including: magazines and newspapers radio and television; outdoor advertising, including billboards, signs at public venues, and transit advertising; the internet, including webpages, banner advertisements, video streaming (e.g. YouTube), and social networking and microblogging (e.g. LinkedIn); social media and internet discussion sites; mobile phone messages (e.g. SMS, MMS, text messages); product brochures and promotional fact sheets; direct mail (e.g. by post, facsimile or email); telemarketing activities and audio messages for telephone callers on hold; and presentations to groups of people, seminars and advertorials. Overview of Good practice guidance The following is extracted from RG 234, I have added general insurance context where relevant to do so. Returns, features, benefits and risks Advertisements for general insurance products should give a balanced message about the returns, features, benefits and risks associated with the product. Benefits should not be given undue prominence compared with risks. Warnings, disclaimers, qualifications and fine print Warnings, disclaimers and qualifications should not be inconsistent with other content in an advertisement, including any headline claims. Warnings, disclaimers and qualifications should have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing the advertisement. Consumers should not need to go to another website (or other page of the website) or document (such as a PDS or TMD) to correct a misleading impression. Fees and costs Where a fee or cost is referred to in an advertisement, it should give a realistic impression of the overall level of fees and costs a consumer is likely to pay, including any indirect fees or costs. The premium, commission and government charges should be clearly identified. Comparisons Comparisons should […]
ASIC has released its Corporate Plan 2025-26. ASIC Chair Joe Longo Mr Longo said the plan formalised ASIC’s focus on regulatory simplification. (Media Release 25-177MR) ‘A focus on simpler and better regulation is now a concrete part of ASIC’s 2025-29 plan and will see the agency continue that focus to make it easier to interact with ASIC, to understand our expectations, for us to administer the law, and ultimately to cut red tape.’ ASIC’s Corporate Plan also outlines how the agency is maturing its approach to measuring and assessing its performance, including introducing a new suite of performance measures. ‘This will help our stakeholders better understand ASIC’s impact,’ Mr Longo said. Impacts for General Insurance I have extracted the parts of ASIC’s Corporate Plan 2025-26 that impact general insurance. 12 month work Guided by the strategic priorities set out in the plan, ASIC’s work over the next 12 months and beyond will include: driving regulatory reform to ensure the stability, fairness and transparency of our capital markets ensuring stable, secure and resilient market infrastructure pursuing continuous improvement in artificial intelligence (AI) governance and cyber security holding superannuation trustees accountable for Australians’ retirement savings, and reducing the regulatory burden on businesses. 2025-29 plan highlighting general insurance impacts ASIC are focused on addressing the most significant issues in the regulatory environment and bolstering ASIC’s capabilities to achieve this. In 2025–29, work under ASIC’s key activities will be guided by five strategic priorities. Improve consumer outcomes Strengthen market disclosure and professional conduct Support better retirement outcomes and member services Strengthen operational digital and data resilience and safety Drive integrity and transparency across markets Improve consumer outcomes – general insurance IDR – ASIC will review compliance by licensees with their obligations to report to ASIC on complaints, IDR processes, and outcomes. ASIC will continue publishing IDR data, a key part of the IDR reporting requirement. General insurance premiums – ASIC will examine the accuracy and transparency of general insurers’ disclosures about premiums and work to better understand consumer experiences. General insurance cash settlements – ASIC will review general insurers’ use of cash settlements to better understand the practices and disclosures surrounding the offers being made and to assess whether there are risks of consumer harm. Indigenous consumer outcomes – ASIC will maintain their Indigenous Outreach Program to ensure ASIC consider and understand the needs of Indigenous consumers responding to misconduct impacting Indigenous communities. ASIC will continue to build our understanding of how Indigenous communities are engaging with general insurance products and using these products to manage risks to assets of value. Strengthen market disclosure and professional conduct Sustainability-related actions – ASIC will take regulatory or enforcement action, where necessary, to protect investors and consumers. ASIC will focus on greenwashing and complaints handling by insurers following severe weather events. Auditor independence and conflicts of interest – ASIC will continue to examine auditors’ compliance with their independence and conflicts of interest obligations and publish our surveillance findings. Director and officer conflicts of interest – ASIC will […]
AFS Licensees must have processes, procedures or arrangements for ensuring that, as far as reasonably practicable, they comply with their obligations as a licensee (refer ASIC RG 104.23) and those measures should be documented (RG 104.26) APRA-regulated insurers must have mechanisms in place for monitoring and ensuring ongoing compliance with all prudential requirements (CPS 220 paragraph 35(f)). Insurers under the GI Code of Practice must have appropriate systems and processes in place to enable the Code Governance Committee to monitor compliance with the Code. (paragraph 180). Insurance brokers and their authorised representatives under the Brokers Code of Practice must have in place policies and procedures for their organisation and embed a culture that reflects the Code in the way they provide services and deal with others (paragraph 8.2(a)(iii)). If you don’t use an Obligations register to record your obligations, its likely: you have a reactive approach to compliance; compliance is seen as a series of random tasks and activities; providing evidence of compliance becomes a lengthy ‘search for a document’ process’; that compliance is not embedded within your business; there is a lack of assurance that you are complying with your obligations; and there is a heightened risk of non-compliance with unresolved incidents and breaches leading to increased operational risk, regulatory risk and regulatory scrutiny. The purpose of an Obligations register Irrespective of the source of an obligation, all obligations can be adequately managed by being recorded in an Obligations register. I adopt 2 approaches when designing an Obligations register for my clients (AFS Licensees such as brokers, underwriting agencies & TPAs; APRA regulated insurers and insurance service providers): I design the Obligations register within the Risk & Compliance Manual. This ensures that the obligation has context with a narrative explaining the source of the obligation and how it may operate with other obligations; or a stand-alone register, typically for larger organisations. Irrespective of the approach, the purpose of an Obligations Register is to identify obligations (irrespective of source) and capture those in a single register. Sources of obligations can arise under: Legislation such as Corporations Act, ASIC Act, Privacy Act, Autonomous Sanctions, Act, Competition and Consumer Act; APRA Prudential Standards such as CPS 230 (Operational risk) and CPS 234 (Information Security); ASIC Regulatory Guides such as RG 271 (Dispute resoultion) and RG 166 (Licensing financial requirements); Industry Codes – GI Code and Insurance Brokers Code; Binder Agreements; or Material Service Provider agreements. The [key] control environment Once Obligations have been captured in the register, Key controls are then assigned to each obligation, designed to ensure that each obligation is adequately managed. From this exercise, it is apparent that a Key control may adequately manage multiple obligations. This drives efficiency in business process and better customer experiences. Assigning key controls to each obligation enables a shift from a focus on obligations to a focus on the control environment. An annual control testing program ensures that key controls are tested from 2 perspectives: that they have been designed effectively (fit-for-purpose); and […]