ASIC has announced new rules pertaining to insurance claims handling which will affect multiple industry groups, including financial advisers.
On passage of the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, which was introduced to Parliament on November 12, advisers will need to be covered by an AFSL when handling insurance claims on behalf of an insurer. Advisers and advice businesses with an existing AFSL will need to apply for a variation so that it covers these new obligations.
Previously, claims handling was exempt from the definition of a "financial service", but the law is now being adjusted in accordance with the recommendation made in the final Royal Commission report that this should not be the case.
ASIC said it expects to commence taking applications for AFSLs and AFSL variations from January next year (subject to passage of the Bill). The regulator also recommended prompt submission of applications because during the transition period between 1 July 2021 and 31 December 2021, claims handling services can only be provided if an application has been lodged by 30 June 2021.
From 2022, only those with approved applications will be able to provide the service.
These upcoming changes follow on from ASIC noting that the number of advisers on the Financial Advisers Register has dropped 14.6% below the long-term average as at 5 November 2020 and expressing concerns about the long-term affordability and availability of financial advice. As a result, the regulator has launched a new affordable advice project.
Commenting on this at the time, ASIC commissioner Danielle Press said: "Good-quality affordable personal advice may help consumers make better financial decisions, especially during times of heightened vulnerability."
Indeed, the need for financial advice in circumstances where COVID-19 has thrown the world economy into chaos – and even before that, where the average Australian was already set to outlive their money by 11 years – has become increasingly apparent, as highlighted extensively in the new season of Secrets of the Money Masters.
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