While the clock is still ticking for insurers to implement reforms recommended by Commissioner Hayne, it is now ticking more slowly. The Australian Government has announced that implementation of the reforms recommended by the Financial Services Royal Commission will be deferred due to the COVID-19 pandemic. Commencement dates contained in the exposure draft legislation issued prior to the COVID-19 pandemic will be extended by 6 months. This gives insurers, third party claims administrators, coverholders and underwriting agencies more time to prepare for the changes and enables them to focus their efforts on supporting customers during the pandemic.
Under the updated timetable, measures that were originally scheduled for introduction to Parliament by:
- 30 June 2020 will now be introduced by December 2020; and
- December 2020 will now be introduced by 30 June 2021.
The pandemic provides a real opportunity for insurers to rebuild consumer trust by putting customers first. Accordingly, while regulatory reform has been deferred, implementation of certain provisions of the 2020 General Insurance Code of Practice has been fast-tracked.
Read more about other upcoming reforms on our Insurance Regulatory Hub.
ASIC specific deferrals
The PDDO received royal assent on 5 April 2019 and the two year transition period was scheduled to end on 5 April 2021. Consistent with the Government’s announcement, ASIC has now indicated the transition period will be extended until 5 October 2021. ASIC expects entities to continue preparing for commencement in accordance with the extended timeline.
ASIC has also updated its 2020 regulatory priorities in order to focus on the impact of Covid-19. These include:
- the release of updated Regulatory Guide 165 Internal Dispute Resolution which was initially scheduled for late 2019 has now been deferred until further notice and the existing regulatory guide continues to apply;
- ASIC’s natural disaster working group will continue to monitor insurers’ responses to recent natural disasters including bushfires, storms and hailstorms. However, detailed data requests will be deferred until further notice;
- ASIC’s travel insurance review has been deferred until further notice, however, it will be included as part of a future review of unfair contract terms; and
- follow up work and data requests in relation to consumer credit insurance have been deferred until further notice.
ASIC has also publically stated it expects firms involved in handling insurance claims to act with the utmost good faith and for insurers to communicate clearly and accurately to customers about their cover recognising the changing situation they may be facing. See ASIC’s letter to insurers.
APRA specific deferrals
The Australian Prudential Regulation Authority (APRA) has postponed the majority of its policy and supervision agenda outlined in January 2020 in order to focus on Covid-19 responses. This means:
- suspension of all substantive public consultations and actions to finalise revisions to the prudential framework, including consultations on prudential and reporting standards, until 30 September 2020. However, the situation will be kept under review. In January 2020, APRA had announced it intended to consult on revised versions of multiple prudential standards applicable to insurers:
- CPS220 Risk Management;
- CPS 510 Governance;
- CPS 520 Fit and proper requirements;
- CPS 231 Outsourcing; and
- CPS 232 Business Continuity Management; and
- APRA’s primary supervision focus will be to monitor the impact of Covid-19 on the financial and operational capacity of regulated institutions.
CPS 234 Information Security was initially set to commence by 1 July 2020 at the latest in relation to information assets managed by a third party. APRA has now announced that a six month extension to 1 January 2021 may be available on a case by case basis.
For more information about how Norton Rose Fulbright can help you navigate the insurance regulatory reforms, please feel free to get in touch with the authors.