Insurers, Underwriting Agencies (MGA), Insurance Claims Managers (TPA), Insurance Brokers and any other entity who holds an AFSL for general insurance has general obligations that must be complied with:
A financial services licensee must:
- do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly.
- have in place adequate arrangements for the management of conflicts of interest (also refer RG 181)
- comply with the conditions on the licence. The standard licence conditions are set out on PF 209 and include a ‘key person requirement condition’ if you are heavily dependent on the competence of one or two responsible managers (refer RG 105,52)
- comply with the financial services laws. These include Chapter 7 Corporations Act, ASIC Act Part 2 Div 2, Insurance Contracts Act, Insurance Act (including Prudential Standards & legislation specifically for APRA regulated insurers) and the Privacy Act.
- have available adequate resources (including financial (see RG 166) , technological (RG 104.97-100) and human resources (RG 104.93-96)) to provide the financial services covered by the licence and to carry out supervisory arrangements. This obligation does not apply to APRA regulated insurers.
- maintain the competence to provide those financial services (refer RG 105)
- ensure that its representatives are adequately trained, and are competent, to provide those financial services (RG 104.81-88)
- have an IDR system that meets the enforceable paragraphs of RG 271 and be a member of AFCA
- have adequate risk management systems (RG 104.59-66). This obligation does not apply to APRA regulated insurers.
- comply with regulation 7.6.04. This includes keeping training records, advising ASIC of certain matters & requirements in respect of authorised representatives.
ASIC’s approach to the broad compliance obligations
The broad compliance obligations are both stand-alone obligations and obligations that encompass the other general obligations. This means that:
(a) if you fail to comply with one or more of the other general obligations, you are also likely to breach the broad compliance obligations; and
(b) even though you may be complying with all of the other general obligations, you may still be in breach of the broad compliance obligations. This is because the broad compliance obligations are also stand-alone obligations (RG 104.54)
Reportable situations to ASIC
Obligations 1, 2, 5, 6, 7, 8, 9, 10 are civil penalty provisions. Therefore a breach of these obligations is a Reportable Situation to ASIC (see 912D(4)) all other breaches must be assessed under the criteria in s912D(5).
Documenting your Compliance measures
It is common for some licensees’ compliance measures to be integrated into their risk management systems. Compliance measures can be one of several controls you can use to address or mitigate risks to your business (including the risk of non-compliance with your obligations under the Corporations Act). (refer RG 104.48)
Documentation helps you demonstrate whether or not you are complying with the general obligations. When you document your measures, ASIC expects this will include details of who is responsible, the timeframes involved and associated record keeping and reporting. (RG 104.26)
Implementing, monitoring and reporting your measures
It is not enough just to document your measures. You also need to fully implement them. This means you need to put them into practice and integrate them into the day-to-day conduct of your business.
For measures to work effectively in practice, you need people at all levels of your business, including your senior management, to understand them and be committed to their success. Integrating your measures into the culture of your business helps ensure they are effective on an ongoing basis.
You also need to monitor and report on your compliance, including reporting relevant breaches to ASIC. ASIC expects that youwill keep records of your monitoring and reporting, including records of reports on compliance and breach notifications. (RG 104.27-29)
Assistance with Compliance measures and monitoring program
I tailor fit-for-purpose Risk & Compliance Manuals & Monitoring Programs for my general insurance clients enabling them to meet their AFSL general obligations.
These documents enable risk and compliance to be managed through an operating rhythm and are designed to protect your business, people, customers, business partners and other stakeholders.
Contact me Paul Muirto explore how tailored compliance documentation can assist you in managing your compliance obligations.
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 its use or reliance. This article is intended for educational and informational purposes only and should not be relied upon as professional legal advice.