The frictionless movement of assets is becoming a common feature of markets around the developed world, yet Australia remains a step behind. The ASX is in no mood to rush the move to T+1, however, after its calamitous attempt to implement distributed ledger technology.
It’s a dire situation for consumers but a massive tailwind for financial advisers. More people and more capital in the superannuation coffers than ever, with a stubbornly small number of advisers to service them.Â
ASIC lifts hurdle for insurance advice
The reshaping of the Australian financial advisery industry continued on Friday, with the Australian Securities and Investment Commission (ASIC) releasing details on its new approach to “insurance claims and handling businesses.” The legislation resulted from a recommendation during the Royal Commission and seeks to increase the professionalism and transparency for all parties involved in advising or supporting personal risk insurance claims.
The regulator has clearly identified issues in this area and will now require all participants that provide an insurance “claims handling and settling service” to either have an Australian Financial Services Licenses (AFSL) or, for financial advisers with an AFSL, obtain an additional authority. Despite there being a need for the legislation, it adds an additional layer of regulation and compliance at a time when adviser numbers continue to fall: there are now less than 21,000 registered financial advisers in Australia, down 3.7% in the last year.
What you need to know?
Put simply, you will be considered to be providing “claims handling and settlement service” if you undertake any of the following activities:
- Making a recommendation or stating an opinion in response to an inquiry about a claim or potential claim;
- Making a recommendation or stating an opinion that could influence a decision about making or continuing with a claim;
- Representing someone in pursuing a claim;
- Assisting another person to make a claim;
- Assessing whether an insurer is liable under an insurance product;
- Making a decision to accept or reject all or part of a claim;
- Quantifying an insurer’s liability under an insurance product;
- Offering to settle all or part of a claim; or
- Satisfying a liability of an insurer under a claim.
The difficulty is not in identifying who the regulations cover, but rather who needs to be registered. On first sight, anyone involved in supporting clients in the claims process would appear to be impacted, however, on closer inspection, more specific advice would be required. According to the information sheet, financial advisers only need apply where they “provided financial product advice to an insured person (including one who is a third-party beneficiary) and provide a claims handling and settling service on behalf of the insurer.” In this case, “and” appears to be the operative word. That said, given the importance and timeliness, advisers should no doubt be in discussion with the compliance consultants and dealer groups to confirm their status.
What is not considered advice?
As is generally the case there are many exemptions and carveouts that must be considered.
For instance, participants will not be considered to have provided financial advice by recommending:
- How to submit a claim most effectively;
- How information to support a claim can be obtained most effectively;
- Whether it would be appropriate to replace or repair an insured asset;
- How to mitigate the extent of loss or damage associated with a claim; or
- How to protect against the same or similar loss in the future.
When do you have to register?
According to ASIC, a transition period will be in place requiring applications for variations to AFSL by 30 June 2021. If no application is lodged, advisers would no longer be able to provide the service from 1 January 2022.
