The AFA does not believe that advice licensees will need to vary their licences under recent Royal Commission legislation on claims handling, and recommends its members do nothing for now.
In an alert to its members the association says financial advisers have unfortunately been caught up in the confusion around whether the recent Royal Commission legislation on claims handling would result in advice licensees needing to vary their licences: “We do not believe this will be the case,” it says.
“It is our understanding that financial advisers will be exempt from these new obligations and we recommend that members do nothing at this stage.”
the association …has asked the Government to confirm an exemption for financial advisers…
The association says it has contacted ASIC, the Minister’s Office and the Treasurer’s Office and has asked the Government to confirm an exemption for financial advisers as soon as possible in order to provide certainty, thus removing any concerns. (Also see: AFS Licence for Claims Handling).
As background the AFA explains that recommendation 4.8 of the Hayne Royal Commission, to remove the claims handling exemption, “…was primarily aimed at insurers, to ensure claims handling and settling was executed ‘efficiently, honestly and fairly’ and that ASIC has the power to regulate accordingly”.
It says that at present the handling and settlement of insurance claims is excluded from the definition of ‘financial service’ by a regulation, and as a result, some of the general obligations set out in section 912A of the Corporations Act does not apply to the handling of insurance claims.
On 12 November 2020, the Treasurer introduced the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 into the House of Representatives, which included legislation that will require a licence for claims handling.
“The legislation was clear that financial advisers working on behalf of life insurers would need to obtain a variation to their licence to continue to provide this service. It also made reference to people playing the role of claims intermediaries needing to be licenced.”
AFA says that ASIC’s draft information sheet on claims handling, referring to the legislation and setting out expectations with respect to applying for a licence or varying a licence ”…did not state that financial advisers, who assist their clients with life insurance claims, would need to seek a variation in their licence, however, neither did it provide any clarity on the matter”.
It notes that ASIC was unable to provide this certainty, as it is an issue for the Government to resolve.
…it was not in any way focused upon financial advisers who advocate for their clients in the claims process…
The association’s alert says Royal Commission recommendation 4.8 was “…absolutely focused on insurers (both life and general) and those working on their behalf. It was not in any way focused upon financial advisers who advocate for their clients in the claims process”.
While this is encouraging, I’ll also believe it when I see it, in black-and-white, from the powers that be.
Because as it stands now, the way it’s been written means one of two things:
1) The regulator has made a genuine mistake in providing guidance so fuzzy as to leave licensed advisers as (rightfully) feeling they’re included, or
2) They’re lying now and hoping it all goes away without having to change the wording.
If it’s 1), then that’s a pretty big mistake to make. And if they didn’t mean to include advisers, then why not explicitly exclude them a la the lawyers?
Instead they include some weasel words about it only applying to advisers working ‘on behalf of insurers’?
Given ASICs stated antipathy to commissions, partly because they think the flow of money complicates who we’re working ‘for’, I wouldn’t be surprised if they considered every adviser receiving commissions as working ‘on behalf of insurers’.
Which leaves my suspicious, cynical mind thinking 2) isn’t as impossible as we’d all like to believe.
So until ASIC comes out with a clear, binding statement supporting what they’ve had the ‘courage’ to say in whispered conversations behind closed doors, I’ll harbour some serious doubts.
The fact that they still haven’t done this is a huge red flag to me. I really, really hope I’m wrong.
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