𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆𝗶𝗻𝗴 𝗮𝗻𝗱 𝗺𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝘆𝗼𝘂𝗿 𝗿𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗼𝗯𝗹𝗶𝗴𝗮𝘁𝗶𝗼𝗻𝘀

I’m currently compiling an obligations register for an APRA-regulated insurer. At a Federal level, there are more than 400 obligations that a general insurer needs to identify & manage by mapping to key control(s) & the person(s) accountable. Underwriting Agencies, TPA’s & Insurance Broker generally have 150-200 obligations. For smaller-sized clients, I include obligation tables within a tailored Risk & Compliance manual so that everything is retained in one place & there is context for the obligations. The important lesson is, how can you manage your obligations if you don’t capture [record] them? 𝙎𝙤𝙪𝙧𝙘𝙚𝙨 𝙤𝙛 𝙤𝙗𝙡𝙞𝙜𝙖𝙩𝙞𝙤𝙣𝙨 𝙛𝙤𝙧 𝙂𝙚𝙣𝙚𝙧𝙖𝙡 𝙄𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 The starting point is to get a good text that covers the clauses and provides a pathway to any associated regulations or ASIC Regulatory Guides. I use Thomson Reuters 2024 Corporations Legislation & Lexis Nexis Australian Corporations Legislation 2024 – Vol 1 & 2. So what are the key sources of obligations for general insurance? 𝘊𝘩𝘢𝘱𝘵𝘦𝘳 7 – 𝘊𝘰𝘳𝘱𝘰𝘳𝘢𝘵𝘪𝘰𝘯𝘴 𝘈𝘤𝘵 7.6 – licensing issues, general AFSL obligations, Auth Reps, & restricted [broker] terms 7.7 – disclosure requirements: FSG & Cash Settlement Fact Sheet 7.8 – dealing with clients’ money, lodging financial returns & auditor 7.8A – design & distribution obligations (& TMD) 7.9 – product disclosure: PDS, SPDS, cooling off 7.10 – market misconduct: misleading conduct 𝘈𝘚𝘐𝘊 𝘈𝘤𝘵 Pt 2, Div 2 – unconscionable conduct, unfair contract terms, misleading or deceptive conduct, add-on insurance 𝘐𝘯𝘴𝘶𝘳𝘢𝘯𝘤𝘦 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘴 𝘈𝘤𝘵 includes the duty to take reasonable care, UGF & s54 𝘗𝘳𝘪𝘷𝘢𝘤𝘺 𝘈𝘤𝘵 including the 13 Australian Privacy Principles 𝘈𝘗𝘙𝘈 𝘗𝘳𝘶𝘥𝘦𝘯𝘵𝘪𝘢𝘭 𝘚𝘵𝘢𝘯𝘥𝘢𝘳𝘥𝘴 for Governance, Risk Management, Financial Resilience, Recovery & Resolution & Reporting 𝘍𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘈𝘤𝘤𝘰𝘶𝘯𝘵𝘢𝘣𝘪𝘭𝘪𝘵𝘺 𝘙𝘦𝘨𝘪𝘮𝘦 𝘈𝘤𝘵 Also, don’t forget: Insurance Act especially s114 use of words ‘insurance’ & insurer Spam Act & DNCR Act Autonomous Sanctions – DFAT & United Nations and of course General Insurance Code of Practice & Insurance Brokers Code of Practice. 𝙄𝙙𝙚𝙣𝙩𝙞𝙛𝙮𝙞𝙣𝙜 & 𝙢𝙖𝙣𝙖𝙜𝙞𝙣𝙜 𝙤𝙗𝙡𝙞𝙜𝙖𝙩𝙞𝙤𝙣𝙨 – 𝙖 𝙜𝙧𝙚𝙖𝙩 𝙞𝙣𝙫𝙚𝙨𝙩𝙢𝙚𝙣𝙩 Identifying, recording & managing obligations through key controls & accountability, requires some initial investment of resources however the ongoing benefits soon outweigh the costs.
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𝐀𝐏𝐑𝐀 & 𝐀𝐒𝐈𝐂 𝐫𝐞𝐥𝐞𝐚𝐬𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐩𝐚𝐜𝐤𝐚𝐠𝐞 𝐨𝐧 𝗙𝗔𝗥

A 5 week consultation period is seeking industry feedback on the proposed list of key functions for the insurance industry & the supporting key functions descriptions (by 19 April 2024) 𝘼 𝙬𝙤𝙧𝙙 𝙤𝙛 𝙘𝙖𝙪𝙩𝙞𝙤𝙣 Insurers should resist the temptation to create a FAR framework (& for the matter a CPS230 framework) Insurers & underwriting agencies, TPAs, brokers etc are required under Prudential Standards (insurers) or AFSL general obligations (MGA/TPA/Brokers) to have a risk management framework/system. Often the level of sophistication is a factor of the risk maturity of the business. FAR & CPS 230 presents an opportunity to refresh & enhance existing risk management arrangements not create complexity or duplication through seperate frameworks. Accountability & culture components should already be included in existing risk & compliance frameworks. 𝙁𝘼𝙍 – 𝙘𝙤𝙧𝙚 𝙤𝙗𝙡𝙞𝙜𝙖𝙩𝙞𝙤𝙣𝙨 The FAR introduces 4 core sets of obligations: • accountability obligations; • key personnel obligations; • deferred remuneration obligations; & • notification obligations. 𝘼𝙘𝙘𝙤𝙪𝙣𝙩𝙖𝙗𝙡𝙚 𝙥𝙚𝙧𝙨𝙤𝙣𝙨 Central to FAR is the concept of acountable persons. An accountable person must conduct their responsibilities by: – acting with honesty & integrity, & with due skill, care & diligence; – dealing with the Regulators in an open, constructive & cooperative way; – taking reasonable steps to prevent matters from arising that would adversely affect an insurer; & – taking reasonable steps to prevent matters from arising that would result in a material contravention of financial services laws. 𝙄𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙠𝙚𝙮 𝙛𝙪𝙣𝙘𝙩𝙞𝙤𝙣𝙨 An accountable person has responsibility for the Insurance Key Function if they have actual or effective senior executive responsibility for management or control of the whole of, or a significant or substantial part or aspect of, the applicable key function. The draft proposes the following key functions for insurance: You will readily observe that these can be easily aligned to existing risk categories & Financial Services Laws & Code obligations. 1. Capital management 2. Collections & enforcements 3. Conduct risk management 4. Data management 5. Financial & regulatory reporting 6. Hardship processes 7. Insurance risk management 8. Operational risk management 9. Product design & distribtion obligations 10. Product origination 11. Recovery & exit planning & resolution planning 12. Reinsurance management 13. Scam management 14. Technology management 15. Training & monitoring of relevant representatives & staff 16. Underwriting 17. Whistleblower policy & process 𝗔𝗦𝗜𝗖 𝗥𝗚 𝟮𝟳𝟵 ASIC/APRA has issued an information paper – click here to view! Have a chat with me if you need assistance
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