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?

How do courts construe efficiently, honestly and fairly?

Courts treat efficiently, honestly and fairly as a single, compendious norm, not three watertight, independent duties. This means, a licensee must act efficiently having regard to honesty and fairness, honestly having regard to efficiency and fairness, and fairly having regard to efficiency and honesty.

key elements include:

• Competence / adequate performance (“efficiently”): “efficient” is used in the sense of being capable, competent and adequate, and inefficiency can be shown where performance falls short of the reasonable standard the public is entitled to expect.
• Not limited to criminal dishonesty (“honestly”): it is not necessary to prove dishonesty in the criminal sense; “honestly” can extend to conduct that is “morally wrong in the commercial sense
• Ethical soundness / even-handed dealing (“fairly”): “honestly” used with “fairly” conveys ethical soundness, not merely absence of dishonesty.

In addition:

• Contravention is assessed objectively and may be made out without proving an intentional wrong.
• It is a stand-alone general obligation and does not require breach of some other AFSL general obligation, even though the same facts may also involve other breaches.

ASIC’s guidance (RG 104)

• ASIC acknowledges that what you need to do to comply with your obligations will vary according to the ‘nature, scale and complexity’ of your business. (RG 104.21)
• ASIC notes your compliance measures might include one or a number of different documents and any of a variety of stand-alone or integrated IT systems. As a general rule, the smaller and simpler your business, the smaller and simpler ASIC expects your measures to be. (RG 104.44)
• It follows that insurers, brokers, underwriting agencies and TPA’s providing their financial services directly to retail clients, where the risk of the impact of a breach to cause harm or detriment increases, that more robust controls including governance processes, would be expected, compared to a portfolio of wholesale clients distributed through brokers (however the obligation still applies). Similarly, a fully automated service/distribution model is simpler (noting however increased cybersecurity risk) than a manual service/distribution model and a single insurance portfolio is generally simpler than a multi-line portfolio.
• If you fail to comply with the other general obligations [in s912A(1)], it is unlikely that you will be complying with the ‘efficiently, honestly and fairly’ obligation. (RG 104.55). However, the ‘efficiently, honestly and fairly’ obligation is also a stand-alone obligation that operates separately from the other general obligations. For example, if you have contractual obligations to clients and breach them, this might not be a breach of the other general obligations, but it could amount to a failure to provide your financial services efficiently, honestly and fairly (RG 104.56)

Claims handling and settling: efficiently, honestly and fairly (INFO 253)

Claims handling and settling services were previously excluded from the definition of ‘financial service’ in the Corporations Act 2001 and persons who provided these services were not required to hold an Australian financial services (AFS) licence. This exclusion has now been removed and the AFS licensing regime applies to these services from 1 January 2022.

Information Sheet (INFO 253) was released by ASIC for anyone who provides claims handling and settling services for insurance products regulated by ASIC (updated June 2025)

In respect of ‘efficiently, honestly and fairly’, ASIC considers, to satisfy this obligation, you will generally need to handle and settle insurance claims:

• in a timely way;
• in the least onerous and intrusive way possible
• fairly and transparently, and
• in a way that supports consumers, particularly ones who are experiencing vulnerability or financial hardship

In a claims context this means:

• meet the time frames and standards in the GICoP
• act without undue delay, acknowledging and balancing the negative effects of delay on the claimant against your reasonable requests for information. This includes following up outstanding information, and reviewing the ongoing need for this information, on a regular basis.
• Insurance fulfilment and other service providers acting on your behalf should be sufficiently overseen by you to ensure they do not cause delays. This includes being responsive to complaints about the quality and timeliness of work they perform.
• Assess claims in the least onerous and intrusive way reasonably possible in the circumstances. When assessing a claim, ASIC expect that requests for information would only be made if strictly relevant to the claim. It is not acceptable to issue a standard template request with a long list of requirements to all claimants
• ensuring customers are aware of what they should expect of you and what you expect of them during the claims process, time frames for decisions and progress reports, and an opportunity to respond to adverse findings and the complaints process.
• ensuring that your service can be tailored to consumers who are experiencing vulnerability or financial hardship.
• In respect of Code membership, subscribing to and complying with a relevant industry code of practice, where available, is a strong indicator of your commitment to raised standards that complement the legislative requirements

Sales and distribution: efficiently, honestly and fairly

Extrapolating INFO 253 to sales and distribution, providing your financial services efficiently, honestly and fairly in a sales and distribution context, likely means, having frameworks, governance, systems and processes for:

• meet the time frames and standards in the GICoP and Insurance Brokers Code of Practice;
• insurance brokers meeting Terms of Engagement and Remuneration Disclosure obligations in the the Insurance Brokers Code of Practice;
• insurers and underwriting agencies having a a product design and approval system and brokers and other distributors aligning their distribution processes to such system(s);
• assess applications for insurance cover in the least onerous and intrusive way reasonably possible in the circumstances. This means only asking for information that is relevant to the underwriting decision and not requesting information because your data indicates a causal link to certain seemingly unrelated risk factors;
• ensuring all marketing material and websites are written in plain language, giving balanced information so that consumers can understand the nature of the product or service being advertised
• tailoring of services and products to customers/clients experiencing vulnerability including CWES Designed To Disrupt;
• disclosures and warnings provided in a timely and clear manner;
• ensure fairness is embedded in decision-making (including ethics and integrity principles where automation/AI is used) with objective and documented evidence to support;
• fulfil pricing promises so that customers are able to take insurers (and underwriting agencies) at their word, especially when it comes to discounts that influence customers decision to take up a policy and compare it to other products in the market;
• not engage in pressure selling or other unfair business practices;
• ensure all customers are aware of their cooling-off rights;
• ensuring staff and authorised representatives are identifying and reporting incidents and complaints in a timely manner, and the processes for managing incidents and complaints are fair and reasonable; and
• only allow trained and competent staff and authorised representatives to provide financial product advice (RG 146 trained) and deal in general insurance products.

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.