Many Insurance brokers operate as an Authorised Representative (AR) under the AFS licence of another insurance broker. The risks for the Licensee, from its AR network, are clear and generally well understood: The licensee has obligations in respect of its AR’s, including: take all reasonable steps to ensure that the AR complies with the financial services laws (s912A(1)(ca) Corporations Act; ensure that its AR’s are adequately trained and are competent to provide the financial services (s912A(1)(f)); and NIBA members must ensure that their AR’s comply with the Insurance Brokers Code of Practice (Part 8.1) Generally, the Licensee will: conduct extensive due diligence before appointing an AR under s916A Corporations Act including checking with any previous licensee that the AR was authorised by; provide a risk and compliance framework; provide training; provide systems to facilitate compliance; sign off on marketing materials, disclosure documents and other such collateral; have adequate compliance resources to carry out supervision of the ARs (s912A(1)(d) Corps Act); provide specialist skill sets such as cybersecurity (refer Fortnum case below) monitor and supervise; provide advice and ongoing support; and manage incidents, reportable situations and complaints. Contagion risks A significant risk that must be considered and managed is contagion risk. This is the risk where inadequate compliance arrangements for one AR, will quickly spread to other ARs, resulting in regulatory and reputational impacts for the Licensee and all AR’s in the newtork. This was the case in proceedings recently filed in the NSW Supreme Court by ASIC against Fortnum Private Wealth Limited alleging it failed to properly manage and mitigate cybersecurity risks. ASIC alleges Fortnum did not meet its obligations as an AFS licensee because it failed to have adequate policies, frameworks, systems and controls in place to deal with cybersecurity risks. As a result, ASIC claims Fortnum exposed the company, its authorised representatives (ARs) and clients of its ARs to an unacceptable level of risk of a cyber-attack or a cybersecurity incident. (refer ASIC Media Release 25-143MR). Obligations of an Authorised Representative An AR must assist the Licensee in meeting the Licensee’s financial service obligations (and under the Code) however, the AR has independent and seperate obligations, as an AR, under financial services laws, including: must not hold out that they have an AFS Licence (s911C Corporations Act); must comply with licence conditions imposed by regulations (s914(8) Corps Act and Reg 7.6.04) , specifically: – can only sub-authorise individuals with the Licensee’s consent (note that an AR is not permitted to sub-authorise a company, it can only sub-authorise individuals); – refer to its AR number in all business documents including registered business office and website; – provide a copy of its authorisation on request, to any person, free of charge and as soon as practicable after receiving the request, but no later than 10 business days; provide retail clients with a FSG (s941B); obtain the retail client’s informed consent to any commission payment where personal advice will, or will likely, be provided before insurance is issued or sold (s963BB Corps Act and […]
The doctrine of proximate cause, expressed simply, means that if the insured cause is within the risks covered, the insurer is liable in respect of the loss but if it is within the perils exempted the insurer is not liable. The leading authority is the Leyland Shipping case [1918]. The proximate cause is complicated when concurrent causes, that is, two or more events have caused the loss. Such causes being of equal efficiency. Particular issues arise where the loss results from an excepted peril and from an insured peril, as concurrent causes, in which case the policy exclusion is given effect. This is the well known and often quoted (by IDR teams) the Wayne Tank principle [1974]. However, for consumer insurance claims – is this a fair outcome? Fairness and general insurance claims You will immediately note that this rich area of insurance law is more than 100 years old. The Wayne Tank case is more than 50 years old. Since that time we have seen: Claims handling and settling introduced as a financial service; the Unfair Contract Terms regime applying to general insurance claims; the ongoing development of the GI Code of Practice; and the duty to take reasonable care not to make a misrepresentation replacing the more onerous Duty of Disclosure for consumer insurance contracts. The common theme of these changes is the introduction of fairness, particularly for general insurance products provided to individuals and small business. AFS licencees must provide their claims handling and settling services efficiently, honestly and fairly. Contract terms in a PDS or SME general insurance product can not create a significant imbalance in the parties rights & obligations. The GI Code requires Code subscribers to be honest, efficient, fair, transparent and timely in dealings with the insured. The duty to take reasonable care requires the insurer to consider the characteristics of the insured when considering innocent misleading representations during the sales process. Does it sit comfortably to decline an insurance claim to a consumer (and potentially a consumer experiencing vulnerability) applying strict legal doctrines that were developed at a different time and in a different consumer environment? Clearly the doctrine of proximate cause can not be completely discarded. However, its application can be applied differently to claims for retail clients, consumer insurance contracts and small business standard contracts resulting in a fairer outcome. Fairness and proximate cause The Duty of Utmost Good Faith requires insurers to operate with commercial standards of decency and fairness (High Court Allianz v Deloe Vue). There is a school of thought whether this extends to ‘community standards of decency and fairness’ (refer Mann’s Annotated Insurance Contracts Act 9th ed2025 Lawbook Co. at [13.10.5]). For the purpose of discussion not controversy, how would the proximate cause be considered through a lens of community standards of decency and fairness? How would this operate in practice, in a claims or complaint context? The starting point is in respect of expert’s reports. The expert when considering causation must have a genuine ‘objective’ […]
Note: Reference for my summary of broker’s duties: Sutton on Insurance Law, Enright, Merkin & Hawke, 5th Ed Lawbook Co 2025, at page 323. Section 11 Insurance Contracts Act defines “insurance broker” as a person who carries on the business of arranging contracts of insurance, whether in Australia or elsewhere, as agent for intending insureds. A broker holding an AFS Licence has general obligations as a financial service licensee. A NIBA member has obligations under the Insurance Brokers Code of Practice. a general insurance broker who is a licensee or authorised representative of a licensee must provide the financial services efficiently, honestly and fairly. Financial services includes providing financial product advice and dealing in general insurance products on behalf of a client. the NIBA Code requires brokers to be competent through relevant qualifications, continued education and training; act honestly and with integrity in all dealings; and communicate with clients and prospective clients in a clear and timely manner. Who is my client? A broker must determine: whether the client is a Retail client or wholesale client for the purposes of disclosures and warnings); if a retail client, whether personal advice or general advice will or will likely be provided, to meet obligations for consent for commissions, modified best interest duty and Statement of Advice for personal accident or a General Advice warning; whether the contract is, or is deemed by an insurer as, a consumer insurance contract for the purposes of determining whether the duty to take reasonable care not to make a misrepresentation or the duty of disclosure applies. At common law a broker has concurrent duties to a client under contract and in tort. A broker has a duty to ‘[use] reasonable skill and care in and about obtaining insurance on the client’s behalf‘ (JW Bollom & Co Ltd v Byas Mosley & Co) The expected standards of brokers were summarised in Infinity Reliance Ltd v Heath Crawford Ltd: to perform the agreed services properly, a broker should take reasonable steps to understand the client’s business, and its insurance needs (note the best interest modified duty when providing personal advice to Retail clients under the Corps Act); the broker should aim (reasonably) to match as precisely as possible the risk exposures which have been identified with coverage available; how far the broker, instructed to place specific insurance, is obliged to assess the client’s needs beyond that particular instruction is a case-specific question; to enable the client to take an informed decision, the broker must take reasonable steps to ensure that the client understands the key terms of the cover that is being obtained; where the market offers a variety of different terms which might meet the client’s needs, the reasonable broker will take care to explain the range of available cover and the advantages and disadvantages of each. That way, the client can make an informed choice; the broker should take reasonable steps to enable the client to understand the key aspects of the placement process, for example […]
ASIC’s new website provides streamlined access to licence management services including easy access to ASIC portals such as the new Regulatory Portal for applying for a new AFS Licence or managing an existing licence. In addition, the wesbite provides a wide range of very useful regulatory resources. Regulatory resources for AFS Licensees in general insurance The following pages are relevant for firms providing general insurance products or services: Note: APRA Regulated insurers should also refer to the resources on APRA’s webapge. I’ll cover these resources in a seperate article. regulatory resources search financial services insolvency corporate governance Regulatory resources research This page enables users to search for regulatory guides, information sheets, reports, ASIC consultations. forms and ASIC instruments. Advanced search functionality enables the search to be focused, relevantly, on financial services, financial reporting, dealing with ASIC, financial advice & technology. Financial services Any AFS Licensee in general insurance should bookmark this page There are a number of sub-categories which are very helpfully categorised as follows: regulatory reforms financial advice giving advice financial product disclosure design & distribution obligations dispute resolution reportable situations client money reporting financial accountability regime claims handling and settling AFS Licensees I would also recommend that you bookmark these pages: Information for AFS Licensees ASIC Regulatory Portal – Applications for a new AFS licence, variation or cancellation of an existing licence, or notifications of some changes to an existing licence. Information for AFS Licensees This page also includes links to: Do you need an AFS Licence? Applying for and managing an AFS licence AFS Licensee obligations Changing details and lodging forms varying or cancelling your AFS licence AFS Licensee obligations A comprehensive page that provides a great overview of your obligations as an AFS licensee with links to the relevant ASIC Regulatory Guides and Information Sheets. Insolvency As an AFS licensee (other than APRA regulated insurers), you must meet the base level financial requirements. This includes the solvency and positive net assets requirement – At all times you must be solvent (i.e. be able to pay all your debts as and when they become due and payable) and have total assets that exceed total liabilities (as shown in your most recent annual balance sheet lodged with ASIC), and at all times have no reason to suspect that total assets would no longer exceed total liabilities on a current balance sheet. This ASIC page contains useful general information on insolvency. Corporate governance This is a very useful page for Directors and Company officers. The page also includes a sub-link to cyber resilience and a very useful series of ASIC speeches in connection with Directors as gatekeepers. I will use this page to publish a future article on the role of Directors in setting the right culture. 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 […]
A positive compliance culture, one that truly embraces compliance, ensures that compliance serves its true purpose – to protect. If you begrudge compliance, it’s likely that you and your team see compliance as a bunch of rules that get in the way of doing business. Choosing a safe vehicle to protect your loved ones. When looking for a new or used car, you may consider buying one with some safety features. You may look for new cars that have a 5 star Australasian New Car Assessment Program (ANCAP) rating. Vehicle safety features can significantly improve safety. Technologies like autonomous emergency braking (AEB), blind-spot monitoring and lane-support systems can reduce the risk of a crash. Side curtain airbags can reduce the severity of an injury if a crash cannot be avoided. Going beyond this, we have a strict drivers licensing regime requiring knowledge and application of the road rules. Finally, we have a set of complicated road rules that govern road usage. In NSW alone these rules cover 353 clauses not including sub-clauses, amendments and regulations, Notwithstanding the complexity & cost (& at times frustrations of fines & lost points) of the governance around the use of a motor vehicle, we accept it. Why? because we know that this system of governance protects people & the community that we care about . There is a connection between the head and the heart. Compliance in general insurance is no different, compliance protects what matters. Compliance should not only engage your head, it should engage your heart. Protecting what matters, what you care about. Compliance: protecting what matters It is clear that compliance protects our customers and clients. However, it also protects our people, colleagues, your business, your partners and the wider community. Compliance protects against the risk of non-compliance, such as: Customers and clients: protecting against financial harm or detriment, anxiety, stress, mental health, frustration and time. The business: protecting against financial impact, loss of licence, regulatory enforcement action, reputational impact, lost management time. Your people and representatives: protecting against banning/disqualification, civil penalties, reputation, frustration, stress. Your business partners: protecting against reputational impact, enhanced regulatory scrutiny, financial impact. The community: protecting against systemic insurance industry failures, mistrust, failure to insure. How does compliance protect in general insurance? Imagine a fort: fortified protection through towers and walls designed to protect what matters. A fort provides safety to those within its walls. Compliance protects what matters: customers/clients, the business and its people, partners, stakeholders and the community. How? The four pillars (towers) of Compliance Compliance must have an operating rhythm, producing data indicating the adequacy of your compliance measures, evolving as your business grows and responding to external & internal change. Compliance is an ecosystem continually protecting what matters. The compliance operating rhythm is a structured, predictable way a business operates through its compliance measures incorporating: Governance & frameworks People & culture Procedures & process Systems & reporting Layers of protection Surrounding the fort are layers (walls) of protection. Compliance measures are your combination […]
ASIC previously examined insurers’ claims handling practices following the major floods of 2022 and found weaknesses across key areas. ASIC’s findings were consistent with other reviews, including the House of Representatives Standing Committee on Economics inquiry into insurers’ responses to the 2022 major floods. Recently, ASIC went back to assess how home insurers had addressed the areas of improvement identified in Report 768 Navigating the storm: ASIC’s review of home insurance claims (REP 768), published in August 2023. ASIC’s latest review has found that while insurers implemented programs to improve claims handling functions in recent years, and some progress has been made, there is still significant room for further improvement. ASIC identified that without further work, there is considerable risk of ongoing consumer harm, as well as breaches of Australian financial services (AFS) licensee obligations and the General Insurance Code of Practice (Code). Claims handling obligations Insurers holding an AFSL must meet the general obligations of financial service licensees under s912A(1) Corporations Act. These obligations include providing the claims handling & settling services efficiently, honestly and fairly. ASIC provides guidance on these obligations in INFO 253. ASIC can take enforcement action for a breach of obligations as an AFS Licensee. This includes cancelling or suspending the AFS Licence or imposing conditions on the licence as well as seeking civil penalties. Insurers who subscribe to the Code must comply with, and ensure their employees and Service Suppliers comply with the requirement to be honest, efficient, fair, transparent and timely in all dealings with customers (paragraph 21). Additional obligations arise under Parts 5 (Standards for Service Suppliers), 8 (Making a claim), 9 & 10 (customers experiencing vulnerability including financial hardship), 11 (Complaints), 12 (access to information) and 15 (Claims Investigation Standards). A breach of the Code can lead to sanctions being imposed by the Code Governance Committee with Significant breaches or serious misconduct being reported to ASIC. Insurers must act with the Utmost Good Faith under Section 13 of the Insurance Act With effect from 1 July 2025, CPS 230 applies to insurers (other than Lloyd’s underwriters). ‘Claims processing’ is deemed a critical operation under paragraph 36. Insurers must (1) take reasonable steps to minimise the likelihood and impact of disruptions to its critical operations, and; (2) identify and maintain a register of its material service providers (this includes those providing claim services) and manage the material risks associated with using these providers. What ASIC found ASIC’s review revealed that general insurers made progress to address the areas for improvement identified in their August 2023 report, which focused on better consumer communications, project management, handling of complaints, identification and treatment of vulnerable customers, and resourcing for dealing with claims and complaints. However, ASIC found there was inconsistent progress across the industry and still room for more work. ASIC have outlined high-level observations (see below). High level observations Oversight of independent experts needs work Insurers generally have well-documented quality assurance over their builders and repairers. This includes monitoring data on key performance […]
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 (other than conduct impacting a single customer where no harm is caused). What is misleading or deceptive conduct? The key requirement is that the impugned conduct leads, or is likley 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 only be made between products that have sufficiently similar features or, where an advertisement compares different products, the differences should be made clear in the advertisement. This is important for comaprison websites. Use of certain terms […]
Insurers, Underwriting Agencies (MGA), Insurance Claims Managers (TPA), Insurance Brokers and any other entity who holds an AFSL for general insurance has general obligations that must be complied with: A financial services licensee must: do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly. have in place adequate arrangements for the management of conflicts of interest (also refer RG 181) comply with the conditions on the licence. The standard licence conditions are set out on PF 209 and include a ‘key person requirement condition’ if you are heavily dependent on the competence of one or two responsible managers (refer RG 105,52) comply with the financial services laws. These include Chapter 7 Corporations Act, ASIC Act Part 2 Div 2, Insurance Contracts Act, Insurance Act (including Prudential Standards & legislation specifically for APRA regulated insurers) and the Privacy Act. have available adequate resources (including financial (see RG 166) , technological (RG 104.97-100) and human resources (RG 104.93-96)) to provide the financial services covered by the licence and to carry out supervisory arrangements. This obligation does not apply to APRA regulated insurers. maintain the competence to provide those financial services (refer RG 105) ensure that its representatives are adequately trained, and are competent, to provide those financial services (RG 104.81-88) have an IDR system that meets the enforceable paragraphs of RG 271 and be a member of AFCA have adequate risk management systems (RG 104.59-66). This obligation does not apply to APRA regulated insurers. comply with regulation 7.6.04. This includes keeping training records, advising ASIC of certain matters & requirements in respect of authorised representatives. ASIC’s approach to the broad compliance obligations The broad compliance obligations are both stand-alone obligations and obligations that encompass the other general obligations. This means that: (a) if you fail to comply with one or more of the other general obligations, you are also likely to breach the broad compliance obligations; and (b) even though you may be complying with all of the other general obligations, you may still be in breach of the broad compliance obligations. This is because the broad compliance obligations are also stand-alone obligations (RG 104.54) Reportable situations to ASIC Obligations 1, 2, 5, 6, 7, 8, 9, 10 are civil penalty provisions. Therefore a breach of these obligations is a Reportable Situation to ASIC (see 912D(4)) all other breaches must be assessed under the criteria in s912D(5). Documenting your Compliance measures It is common for some licensees’ compliance measures to be integrated into their risk management systems. Compliance measures can be one of several controls you can use to address or mitigate risks to your business (including the risk of non-compliance with your obligations under the Corporations Act). (refer RG 104.48) Documentation helps you demonstrate whether or not you are complying with the general obligations. When you document your measures, ASIC expects this will include details of who is responsible, the timeframes involved and associated record keeping and reporting. (RG 104.26) […]
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, […]