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. […]