The Coalition Government has released a consultation paper on removing the exemption of insurance claims handling from the definition of ‘financial service’ under the Corporations Act.
It is yet another step forward as part of the Government’s continued action on all 76 recommendations contained in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services.
In his Final Report, Commissioner Hayne recommended “that the Corporations Regulations be amended, so that the handling or settlement of insurance claims, or potential insurance claims, is no longer excluded from the definition of ‘financial service’”. The Commissioner also noted “that the Government has commissioned Treasury to undertake work on this issue”.
In our response to the Final Report, the Government recognised that inappropriate claims handling practices can cause significant consumer detriment as highlighted through the Royal Commission’s round six hearings into insurance.
Regulation of insurance claims handling as a financial service under the Corporations Act will allow the Australian Securities and Investments Commission to enforce a higher standard of behaviour in the industry and ensure consumers can expect the same standard from insurers handling claims as they can from all financial service providers.
Through this consultation process, the Government will identify the most appropriate way to implement Commission Hayne’s recommendation.
This is in contrast to defective legislation proposed by the Labor Party last week, which, if passed, would have removed the exemption for claims handling, but failed to fully capture claims handling as a financial service.
The Coalition Government has agreed to take action on all 76 recommendations contained in the Royal Commission’s Final Report and, in a number of important areas, is going further.
Restoring trust in Australia’s financial system is part of our plan for a stronger economy.
The consultation paper is available on the Treasury website.