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21-067MR ASIC warns time is fast running out for insurance claims handling AFS licence applications
Today ASIC called on insurance claims handling firms to lodge licence applications (new and varied) as soon as possible, and by no later than 7 May 2021.
Since 1 January 2021, claims handling and settling is a financial service which requires a licence by 1 January 2022.
Deputy Chair, Karen Chester said ‘Time is running out for firms to lodge their applications with ASIC. To date we’ve received fewer than 15 applications for the new claims handling and settling service. Some applications received have also needed to be re-submitted because of their poor quality.
‘We are concerned that firms are running the risk of not submitting a complete application in time to get the benefit of the legislated transition period. Firms need to submit an application no later than 7 May 2021. Failing to do so poses a real risk that these firms will have to stop providing claims handling and settling services after 30 June 2021.’
Applications submitted after 7 May 2021 risk being rejected at the deadline of 30 June 2021 which is the legislative deadline to access transitional arrangements. ASIC will reject an application if it is incomplete. Rejections occurring close to the 30 June 2021 deadline may mean that the applicant has insufficient time to rectify and re-submit their application.
A complete application accepted by 30 June 2021 can proceed to assessment and a decision can then be made whether to grant or vary an AFS licence. These applicants can continue to provide claims handling and settling services while ASIC assesses the application during the 6 month transition period.
To assist firms, ASIC issued a draft version of an information sheet on 27 November 2020 to help firms prepare and submit their applications as soon as possible after 1 January 2021.
ASIC is today issuing the final claims handling and settling service information sheet – INFO 253. INFO 253 assists firms to understand how the claims handling and settling services reforms may apply to them.
ASIC has made minor changes to the draft information sheet published in November 2020 following feedback received from stakeholders. Updates have also been made to incorporate relevant regulations made by Government. ASIC anticipates that the Government will make further regulations in relation to persons who are claimant intermediaries, and ASIC will update INFO 253 once they are made.
- sets out who needs to be authorised to provide claims handling and settling services for insurance products and who can act on an AFS licensee’s behalf
- explains how and when to apply for an AFS licence, or variation to an existing AFS licence, including materials that are needed to support an application, and
- refers to existing regulatory guidance on how to meet the general obligations under section 912A of the Corporations Act 2001, and indicates how the obligations may be tailored to claims handling.
Firms seeking to apply for a claims handling and settling services authorisation will need to refer to ASIC’s AFS Licensing Kit (Regulatory Guides 1,2 and 3) and sample AFS eLicensing application. They also must complete the C12 Proof: Insurance Claims Handling and Settling Service Statement in Regulatory Guide 3.
Before 1 January 2021, claims handling and settling services were not a 'financial service' under the Corporations Act 2001 and persons providing claims handling and settling services were not required to hold an AFS licence.
Following the commencement of the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 on 1 January 2021, specified persons – such as insurers, insurance claims managers, and claimant intermediaries – will be required to hold an AFS licence authorisation (or become an authorised representative) for claims handling and settling services.
To help ensure firms applied in time for ASIC to assess applications, ASIC released a draft version of the INFO in November 2020 following introduction of the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 to Parliament (‘the Bill’). The Bill was passed on 10 December 2020 and the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 commenced on 1 January 2021. This started a 12-month transition period for the claims handling reform, during which firms required to hold an AFS licence must lodge an application or variation request by 30 June 2021 in order to continue to provide claims handling and settling services, while ASIC assesses their application.
Failure to submit a complete application by or on 30 June 2021 means a firm will be in breach (unlicensed conduct) if they continue to provide claims handling and settling services from 1 July 2021.
The Government has made Regulations in relation to this reform: the Financial Sector Reform (Hayne Royal Commission Response) (2021 Measures No. 1) Regulations 2021 and the ASIC Supervisory Cost Recovery Levy Amendment (Claims Handling and Settling Services Providers) Regulations 2021. The Government is finalising further Regulations, following the Treasury’s consultation on the ‘Regulation of Claimant Intermediaries’.