AFA chief executive Phil Kewin told ifa that the wording of royal commission legislation introduced to Parliament last month specified that licensing exemptions for claims handling would be removed, meaning those dealing with claims would have to apply for a variation to their AFSL.
“This comes back to recommendation 4.8 from the royal commission around both life and general insurance companies not handling claims efficiently, fairly and honestly,” Mr Kewin said.
“It wasn’t aimed at advisers, it was aimed at making sure those people did the right things and people dealing with claims on behalf of insurers were authorised. What is not clear is about other people dealing with claims, and our discussion with ASIC was that they were only releasing the information they had been given.”
While an information sheet released by ASIC on Friday had included advisers as part of a number of claims intermediaries requiring a new licence authorisation, Mr Kewin said subsequent discussions between the AFA and government had “led us to believe that advisers acting on behalf of clients should be exempt”.
“The regulations aren’t out so they don’t say that at the moment, and with the void of information that’s why people have come to that conclusion,” he said.
“It’s unfortunate because the government could have saved us that stress by clarifying that advisers acting on behalf of clients should be exempt. We’ve been following them up asking for the clarification and I’m hoping that clarity will come as soon as possible.”
In addition to the exemptions provided for lawyers and super trustees, ASIC’s information sheet provides for special exemptions for “claims handling and settling services provided to a person under an arrangement between an AFS licensee and the issuer of the insurance product prescribed by regulation (section 911A(2)(el))”.
This section of the Corporations Act states that ASIC may make case by case licensing exemptions for certain groups specified in writing.
“The regulations will be where the detail is and we haven’t seen the regulations yet. We haven’t been told officially but we think the regulations are going to contain a list of people that should be exempt,” Mr Kewin said.
“My message is that I certainly don’t want our members to worry because there’s enough on their plate as it is – we know the cost of every licence can be up to $3,000 not to mention the process of going through it. I hate to think advisers have to go through that process and I’d be disappointed if that was the outcome, but I don’t believe that’s likely.
“I am hoping common sense will prevail and we’ll see the exemption come out so we can move forward and those this was intended for can do what they need to do.”
This whole debacle shows the folly of Government policy – why bother bringing in a new licence condition if you are going to start throwing around exemptions to all and sundry. Surely the best course of action is to bring it in with no exceptions for anyone. Of course, that would involve all the lawyer pollies not looking after their lawyer mates, so we couldn’t have that.
Is it really that big a deal to ask licensees and advisers to document their process and procedure for claims management in an ASIC proof? The point we really earn our trail is at claim time.
In a past life on the product distribution side I saw far to many situations where advisers received a claim, passed it to the insurer and stayed out of it. Perhaps those practices shouldn’t be able to say they can help with a claim unless they have a licensee monitoring how they deal with claimants?
A claim on any type of life insurance contract means a terrible and emotional set of circumstances for an individual. This is the perfect time for a qualified adviser and their team to embrace and support that client and their family.
Claimants are always terrified that the insurer will decline or frustrate the process and at this point we add tremendous value by helping them to understand the necessary requirements of the insurer as well as being ready to push back against onerous or incorrect requests (which does happen, especially with ongoing claims or mental health claims).
The fact that we are not the insurer, that we want to see a claim paid and that we are EXPERIENCED in a complex and nuanced process involving a sick and extremely stressed family is highly valuable and highly valued.
My time in product, advice and now as a responsible manager has convinced me that advisers and their skilled administration staff are critical at claim time. I would have no problem providing evidence of our methods and process to the regulator and ensuring that as part of our licensee obligations we are monitoring authorised representatives in line with that proof.
Those that won’t make the same effort should consider if they really should be advising on the product if they are not committed to being there when it is relied upon.
You clearly do not understand what it takes to satisfy ASIC. It is not a simple cash of ” providing evidence of our methods and process to the regulator and ensuring that as part of our licensee obligations we are monitoring authorised representatives in line with that proof”. Your statement seems to imply that you have a process and show ASIC the process then repeat it for each client. ASIC views everything as personal advice so each client file must be different to reflect the personal situation of the client and how any action taken is in the best interests of the client. It’s just more paperwork and I’m not interested in it – so as the responsible manager, you do it. Have fun.
At least the AFA are doing something here. The FPA completely quiet as always. When its merger time I’d take Phil over Dante anytime.
Great idea. Can’t wait to see Dante move on.
This has to be a typical case of the Govt yet again not thinking through, not fully understanding and really not considering the impact at all.
This goes to show how little consideration is given to financial advisers who work with client claims and the tremendous value that can be delivered.
Common sense is not so common, especially with our current state of anti-adviser affairs….
“Intimated” ? Nobody in this industry knows what the hell is going on. My fees are increasing by a minimum of 15% in 2021 due to compliance costs.
When have the words “Common Sense and ASIC” ever used in a sentence
I cannot believe that the AFA has asked for a carve out where it is abundantly clear that typical advice AFSLs are excluded for the reason clearly stated in the rules. Generally AFSLs act on behalf of the client, not the company and reading ASIC’s piece on this it is absolutely clear it is those acting for the company that require the authorisation, that is acting as an agent for the company or as a broker and/or underwriter.
It’s not clear because commissions are often paid to advisers/licensees via the insurers. As it currently stands, the wording does in fact imply without special mention that most risk advisers would need to seek additional licensing to be able to assist in the claims process even on behalf of the client.
Thankfully the AFA are on to this.
I can’t help but think this is another shove towards fully removing life insurance commissions from advisers. Not an issue for wealthy clients, but it makes the provision of advice for the average Australian around insurance not affordable.
Whatever Neil