Advice firms urged to hold fire on claims handling

Last week, the corporate regulator released its final claims handling and settling service information sheet, urging those who did require an additional licence authorisation to provide claims services to do so by 7 May at the latest.

The new rules came as a result of royal commission legislation passed at the end of last year, which brought handling and settlement of insurance claims under the AFSL regime.

ASIC deputy chair Karen Chester warned that time was “running out” for firms who needed the new authorisation, as applications submitted after the May date would mean they would not qualify for transitional relief.

“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,” Ms Chester said.

“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.”

Advisers dealing with insurance claims are currently still listed in the information sheet as requiring a new licence authorisation, but ASIC acknowledged 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”.

Draft regulations released in December indicate that financial advisers will be exempt from the requirement, with the term “financial adviser” defined as someone who “holds an AFSL that authorises the adviser to provide financial product advice ... and provides personal advice to a person as a retail client ... and the adviser represents the person in pursuing a claim under an insurance product”.

AFA acting chief executive Phil Anderson said the final regulations, on which the association had provided feedback, were due to be released “in the next couple of weeks”.

“We would hope that this regulation will provide a full exemption for financial advisers, so that it was not necessary for them to seek a variation to their licence,” Mr Anderson said.

“We would not encourage advice licensees to apply for a variation at this stage, however, hope that we will have clarity on this within the next couple of weeks.”