Cash Settlement Fact Sheet – Relief

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Sarah

Sarah Murray

As the Head of Licensing, Sarah has oversight and responsibility for all AFS and credit licence applications ensuring they fulfil the legal and regulatory guidelines set by ASIC. Sarah also assists clients maintain their licences through ongoing compliance processes and procedures and the development of compliance programs. She also has oversight of all AUSTRAC registrations and development of Anti-Money Laundering / Counter Terrorism Financing programs on behalf of clients.


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Earlier this year, relief was implemented for claims handling and settling AFS Licensees in relation to the provision of a Cash Settlement Fact Sheet (CSFS). The relief allows AFS Licensees to make a cash settlement offer in emergency situations or cases of immediate need without first providing a CSFS. The relief is subject to conditions and will expire in 2025.

To rely on the exemption the following requirements must be satisfied:

(a) the client has expressly instructed the AFS Licensee they are in immediate need of a cash payment;
(b) the verbal cash settlement offer has been made within 14 days of the insurable event that is the subject of the claim; and
(c) the cash settlement offer (and any other immediate cash payments under the claim) does not exceed $5,000.

Where the above requirements are satisfied, the AFS Licensee must do the following:

(a) verbally give the client the following information:

(i) the options for settlement legally available;
(ii) the sum insured;
(iii) the amount of the cash settlement offered in total and as a breakdown of each component;
(iv) a statement that the client should consider obtaining independent legal or financial advice before agreeing to the cash settlement; and
(v) an outline of the client’s rights of review;

(b) take all reasonable steps to give the client a CSFS within:

i) 48 hours of the verbal cash settlement offer being made, if the CSFS is given electronically; or
(ii) 5 business days of the verbal cash settlement offer being made, if the client has notified they cannot or do not want to be given the CSFS electronically;

(c) take all reasonable steps to make the cash payment within 2 days of the client accepting the verbal cash offer; and
(d) provide the client with the right to have the accepted cash settlement offer reversed on terms that include the following:

(i) the client may exercise the right of refusal up to 12 months after the date the cash payment was made;
(ii) no interest or fees on the amount of the cash payment are payable by the client.

Background

AFS Licensees that provide claims handling and settling services have the obligation to provide a CSFS. The obligation arises where the AFS Licensee:

  • offers retail clients a cash payment to settle all or part of a general insurance claim; and
  • there are other legally available options to settle the claim (i.e.: repair or replacement).

The CSFS must be provided at the time the cash settlement offer is made and must include certain prescribed information.

The obligation to provide a CSFS applies to the AFS Licensee, their Authorised Representatives as well as any person acting on the AFS Licensees behalf at the time the cash settlement offer is made.

Further Reading

Further Resources

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Sarah

Sarah Murray

As the Head of Licensing, Sarah has oversight and responsibility for all AFS and credit licence applications ensuring they fulfil the legal and regulatory guidelines set by ASIC. Sarah also assists clients maintain their licences through ongoing compliance processes and procedures and the development of compliance programs. She also has oversight of all AUSTRAC registrations and development of Anti-Money Laundering / Counter Terrorism Financing programs on behalf of clients.


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