Insurance « Australian Regulatory Compliance Review from Langes+ Lawyers

April 8, 2011

Flood insurance defined

Treasury has released a Consultation Paper dealing with improving consumer understanding of insurance policies and the different approaches taken by insurance companies on coverage for water damage, including flood.

The Consultation Paper contains two proposals designed to address those issues by requiring:

a standard definition of flood, for use in insurance policies; and
short, simple, key facts summaries for insurance policies to be made available to consumers.

The proposed standard definition is:

‘Flood’ means the covering of normally dry land by water that has escaped or been released from the normal confines of:
(a) any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
(b) any reservoir, canal or dam.

There is also a proposal that the General Insurance Code of Practice be amended so that insurers must make a final determination on a claim within six months of the claim being notified, unless there are exceptional circumstances.

The Natural Disasters Insurance Review is due to report back to the Government by 30 September 2011.

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Posted 8th April 2011 by admin in Insurance

March 22, 2011

Case note: misleading conduct in relation to consumer credit insurance

In Sahin & Anor v National Australia Bank Limited & Anor [2011] VSCA 64 the Victorian Court of Appeal varied a consumer credit insurance policy by National Australia Financial Management Ltd to cover a subsequent loan from NAB (and pay outstanding loan instalments) even though cover had not been taken out for that loan.

The issue was whether the Bank’s conduct in the course of an application for a subsequent loan had been misleading and deceptive. Mr and Mrs Sahin claimed that they understood the loan insurance for the first loan would continue in force under the second loan. When Mrs Sahin (the only income earner) was injured in a workplace accident, they sought to claim on the presumed insurance policy. However, the insurer rejected the claim, on the basis that the policy had terminated when the first loan was repaid. The bank said that it had offered Mr and Mrs Sahin loan insurance at the time of arranging the second loan, but they declined the offer because of the additional cost. (more…)

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Posted 22nd March 2011 by admin in Financial Services, Insurance

February 17, 2011

ASIC issues revised IDR and EDR Guides

ASIC has issued revised Regulatory Guide 165 Licensing: internal and external dispute resolution (RG 165) and Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139) under the Corporations Act and National Credit Act.

RG 165 has been revised with a view to assisting financial institutions to settle simple disputes internally with customers.

RG 165 also provides coverage of internal dispute resolution (IDR) and external dispute resolution (EDR) procedures for customers who have loans from bodies which make or buy loans or leases, and repackage and sell them to investors (securitisation).

The guidance issued applies to financial services licensees (AFSLs), credit licensees (ACLs), and some other financial services providers.

The changes simplify the IDR process by not requiring a ‘final response’ when a complaint is resolved to the customer’s complete satisfaction by the end of the fifth business day after the complaint is received, and where the customer hasn’t requested a response in writing: RG 165.94. The exceptions to this are complaints relating to hardship, a declined insurance claim, or the value of an insurance claim – all of which will still require a final response.

When the complaint is not resolved to the customer’s complete satisfaction within five business days customers must still be sent a written response (including EDR details in case they want to take it further).

For those licensees for whom the new guidance is a heightening of standards, ASIC expects them to comply with the new standards as soon as practicable.

ASIC has announced that the Insurance Council of Australia (ICA) will consult with ASIC and consumer stakeholders on a proposal to amend the General Insurance Code of Practice in relation to situations where insurance customers often phone the insurer to discuss a potential claim before lodging a claim.. The amendment would require insurers to ask customers verbally if they want to lodge a formal claim in situations where customers make enquiries about whether they have the necessary cover. The aim is to make the proposed change without waiting for the next formal review of the Code in 2013.

In the meantime, ASIC anticipates insurers will follow this approach as soon as possible.

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Posted 17th February 2011 by David Jacobson in Corporations Act, Financial Services, Insurance

February 4, 2011

Flood insurance definition

The Assistant Treasurer has announced that the Government is working with the insurance industry to develop a plain english standard definition of flood insurance.

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Posted 4th February 2011 by David Jacobson in Insurance

December 15, 2010

New Life prudential standards

APRA has published new Prudential Standard LPS 600 Statutory Funds and Prudential Standard LPS 700 Friendly Society Benefit Funds as well as a new prudential practice guide, LPG 700 Friendly Society Benefit Funds.

The new prudential standards commence on 1 July 2011.

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Posted 15th December 2010 by David Jacobson in Financial Services, Insurance

November 16, 2010

Cloud computing risks for APRA-regulated institutions

APRA has written to the organisations it supervises reminding them of the prudential and risk issues associated with using cloud computing services.

APRA has pointed out the potential risk for:

a financial institution’s ability to continue operations and meet core obligations, following a loss of cloud computing services;
confidentiality and integrity of sensitive (e.g. customer) data/information; and
compliance with legislative and prudential requirements.

APRA says: “In APRA’s view, both materiality and risk assessments necessitate a detailed understanding of the extent and nature of the business processes (including those pertaining to decision-making and support), the technology architecture and the sensitive information (customer or other) impacted by the outsourcing arrangement. APRA has observed that, to date, assessments of cloud computing proposals typically lack sufficient consideration of these factors.”

APRA also expressed concern if material services were obtained from offshore without sufficient analysis.

Cloud computing has become attractive for non-critical functions because it does not lock in users to proprietary technology and standards and reduces high capital costs.

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Posted 16th November 2010 by David Jacobson in Financial Services, Insurance, Web/Tech

October 28, 2010

Telephone sales of general insurance products

ASIC has released Consultation Paper 144 Time for giving a PDS during telephone sales of general insurance products (CP 144) regarding the requirement to provide retail clients with Product Disclosure Statements (PDSs) in instances where they are invited to apply for a general insurance product (in the form of a quote for a particular insurance policy) during a telephone call.

ASIC is considering whether it would be appropriate to give class order relief to:

a) allow some quotes for general insurance products to be provided in the course of telephone calls without giving a PDS at, or before, the time when a quote is provided; and

b) require a regulated person who provides a quote without giving a PDS to instead:

(i) give the client the PDS as soon as practicable, and before the client applies for the policy that is the subject of the quote; and

(ii) provide the retail client with certain information before providing the quote.

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Posted 28th October 2010 by David Jacobson in Corporations Act, Insurance, Marketing

September 23, 2010

Capital for general insurers

The Australian Prudential Regulation Authority (APRA) has written to all Locally Incorporated General Insurers and Authorised Non-Operating Holding Companies under the Insurance Act 1973 in relation to the announcement by the Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, of a substantial strengthening of existing capital requirements for banking institutions.

APRA advises that it is likely that APRA will continue its policy of equivalent capital definitions between the ADI and insurance sectors, including any further reforms agreed by the Basel Committee as part of its review.

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Posted 23rd September 2010 by David Jacobson in Insurance

September 19, 2010

General insurance reporting standards update

APRA has published an updated Q&A document that responds to further queries received from general insurers in relation to the final reporting standards, with accompanying forms and instructions, that implemented the simplified reporting framework for general insurers.

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Posted 19th September 2010 by David Jacobson in Insurance

June 28, 2010

Insurance Contracts Amendment Bill update

The Insurance Contracts Amendment Bill 2010 was introduced into the Senate on 24 June 2010.

Parliament will next sit on 24 August.

Background: unfair terms in insurance contracts

UPDATE: This Bill has lapsed with the calling of the election for 21 August.

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Posted 28th June 2010 by David Jacobson in Insurance