Providing Insurance Claims Handling and Settling Services? Submit your AFSL Application or Variation Now

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Claims Handling and Settling

At the beginning of 2021, ASIC commenced accepting new Australian Financial Services Licence (AFSL) applications for providers of claims handling and settling services to retail clients as well as variations to existing AFSLs to include claims handling and settling services authorisations.

ASIC released draft guidance on the new claims handling and settling services authorisation at the end of 2020. This follows reforms inserting into the Corporations Act 2001 (Cth) the requirement for businesses providing claims handling and settling services to hold an AFSL in relation to such services.

When does this change take effect?

1 January 2021ASIC commenced accepting:
• new AFSL applications for claims handling authorisation; and
• applications to vary existing AFSLs to include claims handling authorisations.
30 June 2021Businesses can continue to provide claims handling and settling services up to 30 June 2021 without having lodged an application.
1 July 2021Businesses who have lodged applications on or before 30 June 2021 can continue to provide claims handling and settling services from 1 July 2021. All other businesses must cease providing claims handling and settling services.
1 January 2022Businesses must hold an AFSL with claims handling authorisations to continue to provide claims handling and settling (unless a later end date to the transitional arrangements are made by the Minister). All other businesses must cease providing claims handling and settling services even if they have an application lodged with ASIC to obtain the claims handling authorisation.

Who does this affect?

As a business or representative providing claims handling and settling services, you must hold an AFSL with a claims handling authorisation if you belong to any of the following categories:

  • insurer;
  • insurance fulfilment provider;
  • claims manager;
  • claimant intermediary;
  • insurance broker; and
  • financial adviser.

It is important to note that the requirement to hold an AFSL with a claims handling authorisation is limited to those with the authority to reject all or part of a claim. You are not required to hold an AFSL if you are merely giving a recommendation or opinion which is reasonably necessary as part of the handling and settling process as this is not considered providing financial product advice. However, if you recommend an insurance product or provide an opinion on how a settlement amount is to be structured, then you will be providing financial product advice.

Exemptions

General Exemption

You will not need to hold an AFSL with a claims handling authorisation unless you fall into the categories mentioned above. Below are examples of categories where an AFSL with such authorisations is not required:

  • loss assessors or loss adjusters;
  • specialists who are providing expert opinion to help an insurer access a claim;
  • investigators;
  • other “fulfilment providers” (unless they are authorised to reject claims);
  • independent medical examiners;
  • debt collection agents; and
  • superannuation trustees.

Specific Exemption

If one of the following services are provided, you are specifically exempted from the requirement to hold an AFSL with a claims handling authorisation:

  • professional legal services provided by a lawyer in a professional capacity relating to insurance claims handling and settling;
  • claims handling and settling services provided to a wholesale client under an arrangement between an AFSL holder and the issuer of the insurance; and
  • claims handling and settling services provided to a person under an arrangement between an AFSL holder and the issuer of the insurance product prescribed by regulation.

Background

Claims handling and settling services were previously excluded from the definition of a “financial service” under Chapter 7 of the Corporations Act. The exclusion was removed in response to the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was given Royal Assent on 17 December 2020 to include reforms for services provided in relation to insurance products.

Further Reading

Contact Us

If you require assistance with applying for a new AFSL or varying your existing AFSL, please contact us.

About The Author

Olivia Hua

Olivia assists with AFSL and ACL applications and the development and implementation of compliance policy documents. Olivia also supports senior staff with ongoing compliance and legal requirements of clients, the preparation of various legal agreements, and conducting legal research.

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