An AFS Licensee must do all things necessary to ensure that the financial services covered by their licence are provided efficiently, honestly and fairly (s 912A(1)(a) Corporations Act). What does this mean in the context of general insurance?
Artificial Intelligence (AI) is being rapidly adopted across APRA-regulated industries as entities seek to realise benefits to their businesses and customers. AI presents great opportunity for productivity and efficiency, and failing to embrace AI may put businesses at a strategic disadvantage. AI also has the potential to create new risks and escalate existing challenges. To understand and assess the current state of AI adoption and associated prudential risks, APRA conducted a targeted engagement on a group of selected large banks, insurers and superannuation trustees in late 2025. The purpose of this letter is to outline these observations and APRA’s expectations in managing AI related risk. Lessons drawn from APRA’s observations of these larger entities, will assist other entities who may be earlier in their AI adoption journey.
Most firms in the insurance industry have reasonable compliance infrastructures in place (the pipeline). However, without data and information flowing through the pipeline, the adequacy of the compliance measures remains in doubt, especially as a means to protect the business, its people, customers, and stakeholders and to meet regulatory requirements on an ongoing basis. Worse, the pipeline, without data & information, provides false assurance to leaders, management and the board. However, by focusing on implementing and embedding 5 key compliance activitiesacross the business, the compliance measures will create a cadence that enables the firm to self-regulate, self-manage, self-report and continually improve business operations, the customer experience and pursue opportunities for growth with confidence. 1. Incidents An incident is an event that occurs where something has gone wrong. Adopting a simple definition of an incident has been identified by ASIC as a key driver of identifying and recording a high number of incidents. All businesses have incidents, things go wrong, errors occur, bugs are present, processes are not foolproof. Firms who are not reporting any incidents are simply not identifying them. Eventually the incident will result in harm or detriment. Firms should adopt a wide view of incidents including operational risk incidents, cybersecurity incidents, people incidents, change management incidents, financial & insurance incidents and startegic risk incidents in addition to compliance, legal and regualtory incidents. Your focus should be training your people (and providing artefacts) that enable them to identify, raise, and quickly report incidents that arise in their area of operation. A more skilled person can then triage incidents and funnel them down the correct pipeline (such as a likely breach or breach of regulatory or Code oprations or an operational risk or a privacy matter or a potential disruption event such as cybersecurity). 2. Complaints ASIC and the Insurance Brokers Code Compliance Committee have highlighted the under-reporting of complaints across general insurance. As at 30/06/2025 ASIC’s IDR data dashboard shows that 81.7% of general insurance complaints were lodged by only 20 firms. Fair, timely and effective IDR processes that provide a genuine opportunity for redress are a key consumer protection and can produce beneficial outcomes for both consumers and firms. A positive complaints management culture is imperative to achieve these outcomes— one that takes a proactive approach in identifying a ‘complaint’, and that does not compound or further delay the recovery of customers and businesses from distressing events. ASIC Cause for complaint: Complaints handling in general insurance Report 802 | December 2024 Understanding that a complaint is simply an expression of customer dissatifaction shifts the culture of complaints to a customer experience improvement rather than a compliance obligation. All complaints must be recorded by the firm including those resolved at first point of contact. Not only does this lead to better customer experiences and business improvements (through the identification of systemic issues) it also enables the firm to meet its regulatory and Code obligations including the reporting of IDR data. 3. Conflicts of interest Managing conflicts of interest is […]
An AFS licence authorises you and your representatives to provide financial services to clients. Part 7.6 Division 2, Corporations Act sets out the requirements to be licensed or authorised. Generally, a person who carries on a financial services business in Australia must hold an Australian financial services licence (AFSL) covering the provision of the financial services (s 911A). Meaning of financial service A person provides a financial service (relevantly for general insurance), if they: provide financial product advice; deal in a financial product; or provide a claims handling and settling service. General insurance products are financial products (s764A), subject to certain exemptions for example surety bonds and reinsurance. This typically applies to insurers, underwriting agencies, insurance brokers, TPAs, and claimant intermediaries. What is financial product advice? A recommendation or a statement of opinion, or a report of either of those things, constitutes financial product advice under s766B (also refer RG 36.19) if: (a) it is intended to influence a person or persons in making a decision about general insurance products, or could reasonably be regarded as being intended to have such an influence; and (b) it is not exempted from the definition of financial product advice. Financial product advice will generally involve a qualitative judgement about, or an evaluation, assessment or comparison of, some or all of the features of one or more general insurance product(s). (refer RG 36.20) What is the meaning of ‘deal in a financial product’? The following conduct constitutes dealing in a financial product within the meaning of s766C(1): applying for or acquiring a general insurance product; issuing a general insurance product; varying a general insurance product (such as by endorsement); or disposing (cancelling) of a general insurance product. Arranging for a person to engage in the above conduct also constitutes dealing. Arranging refers to the process by which a person negotiates for, or brings into effect, a dealing in a general insurance product (e.g. an issue, variation, disposal, acquisition or application). The person who is arranging may be acting for a product issuer, seller or consumer. Arranging includes ‘arranging contracts of insurance’ (RG 36.38-39) Your conduct may constitute arranging if (RG 36.43): your involvement in the chain of events leading to the relevant dealing is of sufficient importance that without that involvement the transaction would probably not take place (e.g. where you are the main or only person consumers deal directly with in a particular transaction); your involvement significantly ‘adds value’ for the person for whom you are acting; and you receive benefits depending on the decisions made by the person for whom you are acting. Referrals You do not need to hold an AFS licence if you provide a financial service that consists only of a referral (RG 36.72), that is: informing another person that a licensee (or one of its representatives) is able to provide a particular financial service or class of financial services; and giving that other person contact details for the licensee or representative. You must disclose any benefits (including commission) […]
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. […]
The power of enforcement – ASIC’s perspective In the Enforcement session opening speech by ASIC Deputy Chair Sarah Court at the ASIC Annual Forum, 13 November 2025, the following example was provided as ‘the power of enforcement.’ I want to start though, with a reflection on ASIC’s enforcement posture. We are often asked why ASIC needs to take a strong enforcement approach. The suggestion seems to be that we should rather call out the issue of concern, allow the firm involved to remedy it, and avoid the cost and uncertainty of court-based litigation. Apart from the obvious answer that we are not, and never will be, the compliance arm of large corporations, the following example is telling. ASIC Commissioners are frequently guests around board tables where we engage with directors and senior executives about the important work that we do. At one recent such engagement I mentioned a 2023 ‘pricing promises’ case ASIC had taken against insurer RACQ. RACQ ultimately admitted to this misconduct, which involved misleading documents sent on millions of occasions, to nearly half a million customers. They collectively missed out on some $86m worth of discounts. A significant penalty was imposed, and there was widespread media attention. A woman at the board table was a former senior executive of another insurer. While that insurer had long been aware of pricing promise issues and the potential for problems of its own, until that point those problems had been secondary. Following this court action, she said the focus changed overnight. There was an immediate review of all pricing promises, whereupon widespread irregularities were discovered. What was interesting about this swift reprioritisation was the broader industry context. The sector was well on notice of ASIC’s concerns on this issue, and there was widescale remediation in place. Despite that fact it was only court action against another like firm that finally prompted this insurer to review, reprioritise and remediate. Therein lies the power of enforcement. Civil penalties as an enforcement action in General Insurance Over recent time, ASIC has commenced the following Federal Court proceedings seeking civil penalties: IAL penalised $40 million over pricing discount failures ASIC alleges QBE misled customers over pricing discounts ASIC takes court action alleging RACQ sent half a million misleading insurance renewal comparisons Cbus ordered to pay $23.5 million penalty for serious failures in processing members death benefits and insurance claims It should be noted that CBus was a superannuation matter.. Legal principles relevant to orders sought by agreement in regulatory proceedings O’Callaghan J. in Australian Securities and Investments Commission v United Super Pty Ltd [2025] FCA 1453 summarised the position: [8] There is an important public policy involved in promoting predictability of outcome in civil penalty proceedings. The practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers. Such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other […]
Insurance brokers, Underwriting Agencies, TPAs, Claimant Intermediaries and Service Providers must take care in the use of certain words that are either restricted or their use may lead to misleading or deceptive conduct. Use of words “insurance” and “insurer” Section 114 Insurance Act places restrictions on the use of the words ‘insurer’ and ‘insurance’. This is relevant for discretionary mutual funds and warranties. Use of the word “insurance” A person commits an offence if the person carries on a business or is proposing to carry on a business; and the person uses the word insurance to describe (expressly or by implication) a product or service that the person supplies, or proposes to supply, in the course of carrying on the business; and the product or service is not insurance; and it is likely in all the circumstances (including the use of the word insurance ) that the product or service could be mistakenly believed to be insurance. Use of the word ‘insurer’ Use of the word “insurer” A person commits an offence if the person carries on a business or is proposing to carry on a business; and the person uses the wordinsurer to describe (expressly or by implication) the person in connection with a product or service that the person supplies, or proposes to supply, in the course of carrying on the business; and either: the product or service is not insurance; or the person would breach a requirement mentioned in subsection (3) [need to be authorised to carry on insurance business] if the person supplied the product or service in the course of carrying on the business; and in a case where the product or service is not insurance–it is likely in all the circumstances (including the use of the wordinsurer ) that the product or service could be mistakenly believed to be insurance. Insurance brokers receiving commissions, remuneration or benefits from insurer or underwriting agency Brokers who receive commissions, remuneration or benefits from an insurer or underwriting agency are not permitted to use the word independent , impartial or unbiased. Refer Section 923A Corporations Act Insurance brokers – restricted terms A person may only use the following terms if authorised by a condition on their AFS Licence: insurance broker, insurance broking or general insurance broker (Section 923B Corporations Act) Restricted terms in Advertising financial products and services Care should be taken when using certain terms and phrases in an advertisement, particularly where the way those terms and phrases are used is not consistent with the ordinary meaning commonly recognised by consumers (e.g. ‘free’, ‘secure’ and ‘guaranteed’). RG 234.91 Inappropriately using terms and phrases can: create expectations that cannot be met; indicate a certain level of security that does not exist; and indicate different levels of protection and different levels of risk. The use of such terms may lead to misleading or deceptive conduct. Use of technical language and industry jargon in advertising Industry concepts or jargon may not be well understood by many consumers and should be […]