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 […]
The use of technology in general insurance is increasing at a cautious pace due to the perceived lack of regulatory guidance or guardrails. APRA guardrails In respect of the General Insurance industry, it’s more likely that APRA will shape the governance for the use of technology rather than ASIC. Having said that, the influence of ASIC will continue to be significant at the operational level especially for Insurance brokers. We have already seen the influence of CPS 234 (Information security) on the industry & moreso with CPS 230 (Operational risk). APRA regulated insurers are responsible for their service suppliers therefore the Prudential Standards result in a cascading effect leading to industry change for Insurers and their Underwriting Agencies, TPAs and other service suppliers. A similar situation exists for Lloyds coverholders due to UK regulations and governance applying to Lloyds underwriters. ASIC recently released REP 798 Beware the gap: Governance arrangements in the face of AI innovation (29th October 2024). ASIC reviewed how 23 AFS licensees and credit licensees are using and planning to use artificial intelligence, how they are identifying and mitigating associated consumer risks, and their governance arrangements. The report outlines the key findings from that review. ASIC commented but on the whole, the way licensees used AI was quite cautious in terms of decision making and interactions with consumers: AI generally augmented rather than replaced human decision making and there was only limited direct interaction between AI and consumers. From a regulatory compliance perspective, the blending of human expertise and technology efficiency appears to be the sensible approach in the short to medium term. As a rule of thumb, the more severe the consequences of non-compliance, the higher involvement of people in technology driven processes and decision-making. The theme from ASIC’s report was that the (t)he maturity of governance and risk management did not always align with the nature and scale of licensees’ AI use (finding 7). This supports an APRA driven approach for governance. Start with insurers and allow the changes to cascade downstream to service suppliers and throughout the industry. Regulations are technology neutral It’s important to note that financial services laws are technology neutral. The AFSL general obligation to provide financial services ‘efficiently, honestly and fairly’, does not care whether human or technological means are used to provide the financial services, provided the overarching obligation is met. This is supported by the AFSL adequate resources general obligation, requiring AFS Licensees to have adequate resources (that is, the adequacy of human, technological and financial resources) to provide the financial services. This requirement does not apply to APRA regulated insurers as their obligations in this respect are covered by Prudential Standards such as CPS 234 and 230. Technology and the law – General insurance: where to start? The starting point should be Australia’s AI Ethics Principles Australia’s 8 Artificial Intelligence (AI) Ethics Principles are designed to ensure AI is safe, secure and reliable. They will help: achieve safer, more reliable and fairer outcomes for all Australians reduce […]
Change is constant – none moreso the case in General Insurance – regulatory change, upcoming Code changes, changes due to regulator reviews, Court decisions, Code compliance reviews, the list is endless, add to that internal change due to binder & capacity changes, service supplier changes and the list goes on. Large insurers manage change through project management teams & change pipelines however what do you do if your resources are limited? This article has been written for Underwriting Agencies, Lloyds coverholders, Insurance Brokers, TPAs, Service Suppliers & small to medium sized insurers who must manage regulatory change and remain compliant through the complexity created by change. 1. The importance of a compliance operating rhythm The starting point is to have a tailored to your business, Risk & Compliance Manual that describes your compliance measures and provides you with an operating rhythm to managing risk & compliance. The Manual must include your obligations (financial services laws, GI or NIBA Code, binder agreement(s), service supplier agreements etc) and the key controls that are assigned to manage the obligations. A seperate Obligations register is suitable for larger firms provided the register is referenced in the Manual including how the register is managed. 2. The source of regulatory change Your manual must identify your sources of regulatory change. They are numerous and generally include (for non-lawyers) signing up to receive email feeds from regulators such as ASIC, APRA, OAIC, Austrac, ACCC AFCA Industry Associations such as ICA, NIBA, UAC and Insurtech Australia Financial services legal firms Insurance news services me via my Linkedin posts and my monthly Newsletter Navigating Compliance in General Insurance Also be mindful of internal change or change from your business partners. 3. High level review You’ve identified the regulatory change. What next? At this stage ask 3 questions: does this change apply to General Insurance? and, if so, does this change apply to the cohort I’m part of? (brokers, underwriting agency, TPA, service suppliers, insurers); and/or will this change impact me upstream/downstream (eg a Prudential Standard or the GI Code of Practice that applies to an insurer)? If yes to these questions proceed with step 4 otherwise ignore the change. 4. Deep analysis You need to work out the impact of the regulatory change to your business. It is useful to engage with your Industry Association, peers or your risk & compliance advisor (I’m happy to assist with any queries) to understand the common approaches that are being adopted across the industry to the regulatory change. Adopting the Who, What, When, Where, Why, and How approach is useful start with ‘why’ and understand the underlying rationale and purpose of the change ‘what’ is about the details. What does the new law require me to do? ‘when’ does the regulatory change take effect? This assists in planning the runway. ‘Where’ does the regulatory change apply? eg underwriting, claims, broking ‘how’ provides the details of what you must do to comply with the new regualtory change ‘who’ does the change apply to […]
An Australian financial services licensee (Kalkine) must appoint an independent compliance consultant to address ASIC concerns that the Kalkine’s customer service representatives were giving unlicensed advice. (refer ASIC Media Release 25-085MR) New licence conditions have been imposed on the Kalkine’s licence to ensure compliance with its obligations as an AFS licensee. These conditions require Kalkine to engage a consultant to review, assess and report to ASIC whether Kalkine’s interactions with its customers are compliant and its supervision mechanisms are adequate. ASIC had concerns that: Kalkine’s representatives, who are based in India, may have provided personal advice as part of the sale of subscription services when Kalkine’s AFS licence only authorised it to provide general financial product advice, Kalkine’s representatives may have misrepresented to customers the kind of advice being given, by qualifying this as general advice but leaving customers with the impression that the advice was directed to their own personal circumstances, Kalkine failed to do all things necessary to ensure that the financial services covered by its AFS licence were provided efficiently, honestly and fairly including but not limited to ensuring the advice being given by its representatives was appropriate and within the scope of its licence, and Kalkine’s processes to ensure that its representatives were complying with the law when interacting with consumers were inadequate. Westpac case and personal advice The High Court in Westpac Securities Administration Ltd v Australian Securities and Investments Commission [2021] HCA 3 held that WSAL and BTFM 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. The decision of the High Court clarified the difference between general and personal advice for consumers and financial services providers. ASIC Commissioner Danielle Press said (ASIC Media Release 3 February 2021), ‘The High Court has provided clarity concerning the differences between personal advice and general advice. Westpac were actively conducting a sales campaign aimed at rolling customers into Westpac products under the banner of general advice.’ 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 directly about their personal objectives. Members were not encouraged to seek personal advice before deciding whether to accept the rollover service.’ Key compliance takeaways A General Advice Warning does not make the advice provided general advice. It is substance over form When you are giving general advice to a client, in addition to giving a general advice warning, it is good practice to take reasonable steps to ensure that the client understands upfront that they are getting general advice and not personal advice. You should take reasonable steps to ensure that the client understands that you have not taken […]
‘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, […]
In its preamble, The Insurance Contracts Act is, an Act to reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts, operate fairly, and for related purposes The Act provides the foundation of insurance: the Utmost Good Faith, and for consumer insurance contracts ‘the insureds duty to take reasonable care not to make a misrepresentation.’ The powers that ASIC has under the insurance Contracts Act add significant weight to ASIC’s enforcement tool-kit and their already far-reaching enforcement powers under the ASIC Act & Corporations Act. ASIC responsible for general administration of Act The Insurance Contracts Act (Act) is one of several financial service laws referenced in section 912A(1) Corporations Act. AFS Licensees must: comply with the financial services laws (s912A(1)(c)); and take reasonable steps to ensure that its representatives comply with the financial services laws (s912A(1)(ca)) Powers of the ASIC (section 11B) ASIC’s powers are set out in Part IA of the Act. ASIC has the general administration of the Act (s11A) ASIC has power to do all things that are necessary or convenient to be done in connection with the administration of the Act and, without limiting the generality of that power, has power: (a) to promote the development of facilities for handling inquiries in relation to insurance matters; (b) to monitor complaints in relation to insurance matters (note that this is in addition to Corporations Act and enforceable paragraphs of RG 271); (c) to liaise generally with other persons or bodies having a responsibility to deal with inquiries, complaints and disputes concerning insurance matters (such as Code Governance Committee and AFCA); (d) to review documents (including documents promoting particular kinds of insurance cover) issued by insurers (such as PDS, TMD, key fact sheets etc) and given to ASIC in compliance with section 11C; (e) to review particulars, statistics and documents given to ASIC in compliance with section 11D; and (f) to monitor legal judgments, industry trends and the development of community expectations that are, or are likely to be, of relevance to the efficient operation of the Act; and (g) to promote the education of the insurance industry, the legal profession and consumers as to the objectives and requirements of the Act. Supervisory powers—ASIC may obtain insurance documents (section 11C) 1) ASIC may, for any purpose connected with the general administration of the Act , require an insurer within 30 days (following ASICs written notice) provide: (a) documents specified in the notice relating to insurance cover provided, or proposed to be provided, by the insurer; or (b) documents relating to insurance cover of a kind specified in the notice provided, or proposed to be provided, by the insurer. Non compliance without reasonable excuse is a strict liability offence. Supervisory powers—ASIC may review administrative arrangements (section 11D) ASIC may, require an insurer to give to ASIC, within 30 days of receipt of […]
As Tropical Cyclone Alfred approaches Queensland & Northern NSW, it is appropriate for general insurers, underwriting agencies, brokers, insurance claim managers and service suppliers to consider how the GI Code of Practce (Code) responds to Catastrophes. Firstly, for consumers the ICA has advised, where possible, to prepare, residents should: Clear their property and gutters from loose material that possibly cause injury or damage during extreme winds or heavy rain, including moving outdoor furniture and pool accessories Secure boats or vehicles and move their car under cover Place important documents and valuables in plastic bags or other waterproof containers and put in a safe place Check your emergency kit is ready and nearby Insurance disaster response specialists are on standby, and the Insurance Council is liaising with the State Government, Queensland Reconstruction Authority and the National Emergency Management Agency in preparation. Code overarching obligations Insurers & their Distributors and Service Suppliers will be honest, efficient, fair, transparent and timely in dealings with customers. This is the Code’s overarching obligation to consumers and continues during Catastrophes (paragraph 21) Fast-tracking urgent claims Where an event (for example, a natural disaster) caused an insured to be in urgent financial need of the benefits they are entitled to under the policy, insurers we will do either or both of the following: fast-track both the insurers assessment of the claim and the process followed to make a decision about the claim; pay an advance amount to help ease an urgent financial need — insurers will do this within 5 Business Days after demonstration of an urgent financial need. If the insured is not happy with the insurers response to a request about urgent financial need, then the insurer must tell the insured about their Complaints process. (paragraphs 64-66) Claims for total loss When an insured has suffered a total loss, the insurer and Service Suppliers will treat the claim with sensitivity. If the claim has been accepted for a total loss under a home building and home contents insurance policy and the insured is unable to provide proof of ownership for the relevant insured property because it was lost in or damaged by the insured event (and ownership is clear) insurers will not: require proof of ownership; or require a list of insured property that was lost or damaged. (paragraph 80) Responding to Catastrophes Insurers will respond to Catastrophes efficiently, professionally, practically and compassionately. Insurers will co-operate and work with the Insurance Council of Australia on industry coordination and communications under the Insurance Council of Australia’s industry Catastrophe coordination arrangements. If an insured has a property claim resulting from a Catastrophe and the insurer has finalised the claim within 1 month after the Catastrophe event causing the loss, the insured can request a review of the claim if they think that assessment of the loss was not complete or accurate, even though a release was signed. Insureds have up to 12 months from the date of finalisation of the claim to ask for a review of […]
The key to successfully managing your compliance obligations is to ensure that all your people are on the same page – this requires a consistent, documented approach to compliance & training. Your people includes employees, authorised representatives, distributors and service providers acting on your behalf. General Insurance Obligations AFS Licensees must ensure that its representatives: comply with the financial services laws; & adequately trained (including by complying with the CPD provisions), and are competent, to provide those financial services Subscribers to the GI Code of Practice must: ensure Employees and Distributors to receive appropriate education and training; that claim Service Suppliers and their employees are qualified by education, training or experience Insurance brokers under the Brokers Code of Practice must: ensure all of their employees, agents and representatives receive appropriate education and training to provide their services competently; and receive training on the Code at least once every year. It is obvious from the above that the training and competency obligations are specific and must be documented to demonstrate evidence of compliance. Compliance training To often I observe that organisations simply mandate that their employees and others acting on their behalf must undertake xx number of hours each year or achieve 20/25 CPD or CIP points. This requirement, of itself, does not comply with your Code or financial service laws obligations. The training must be relevant & cover financial service laws, Industry Codes and your general insurance products and services. Key principles The training must be conducted during induction and at least annually. That is there is a regular, systematic approach to training The training must cover the financial service laws, the relevant Industry Code and the products and services being provided by your business Training must be recorded in a register (for Licensees, this is a regulatory requirement Responsible Managers should undertake specific training designed for responsible managers Compliance measures should be documented in a tailored, fit-for-purpose & easy-to-read manual and compliment the training. (Contact me for assistance) Your people need constant reminding about raising incidents & complaints through FAQs, standing meeting agenda items, attestations etc. This ensures training is put into practice Use breach investigations and quality assurance activities as an oportunity to provide refresher training when gaps are identified The training should use business case studies and scenarios and test understanding