Distribution Arrangements
Compliance with requirements for 3rd party GI distribution arrangements is critical for Brokers, underwriting agencies & insurers.
It is an offence to distribute general insurance products if you are not:
- an ASF licensee;
- an AR of a licensee;
- acting under an ASIC instrument; or
- relying upon an exemption.
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This arrangement allows a broker or MGA to access the referrer’s customer database & offer them insurance products/service. Typically the referrer is a non-financial service business.
A referrer does not provide financial services (& is not required to hold a licence or be appointed as an AR) provided:
- they only inform their customers that another person (A) provides insurance products or services;
- provide the contact details of (A); &
- disclose to their client if they are being paid a referral fee by (A).
It is critical that the referrer does no more than referring. The more involved in the insurance transaction, the more likely they are to provide a financial service.
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An AR arrangement enables firm B to provide financial services under firm A’s AFS Licence.
An AR may be authorised to provide all or part of the Licensee’s financial services.
The licensee is responsible for ensuring the AR complies with financial service laws & its licence conditions however, the AR also has independent obligations.
Generally, AR’s must be notified to ASIC within 30 business days of appointment. There are also a number of other formalities that are required.
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Under this instrument, a person may distribute insurance products on behalf of the licensee, subject to:
- the distributor not being an AR of the Licensee;
- provides details of the licensee’s IDR;
- discloses the relationship & remuneration received; &
- does not provide financial product advice.
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Under this instrument, typically a person is provided with a master insurance policy & extends cover to its clients as a named individual for payment of a premium.
The GPB:
- must not be carrying on financial services as its primary business, the arrangement is ‘incidental’ to its primary business; &
- must not make a profit from the arrangement. They can only cover their reasonable expenses in administering the arrangement.
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A licensee has obligations to monitor all these arrangements & should adopt a systematic approach.