EXPLANATORY STATEMENT
STATUTORY RULES 1989 NO. 277
INSURANCE (AGENTS AND BROKERS) REGULATIONS (AMENDMENT)
ISSUED BY AUTHORITY OF THE TREASURER
The Insurance (Agents and Brokers) Act 1984 (the Act) was amended by Part IV of the Insurance Legislation Amendment Act 1989 to provide for increased protection to insureds where contracts of insurance are arranged on their behalf with foreign insurers not authorised to conduct insurance business in Australia.
The regulations deal with a number of detailed matters which need to be specified for purposes of giving full effect to the measures introduced into the Act earlier this year. In particular, the regulations specify a number of detailed matters relating to arrangements for registration of insurance intermediaries dealing with unauthorised foreign insurers and prescribe the form of the written acknowledgement which registered intermediaries must obtain from insureds where insurance cover is being placed with an unauthorised foreign insurer. The regulations also provide a basis for the improved collection of statistical information and effect a number of improvements to the supervisory mechanisms of the Act.
Sections 9, 25A, 31B, 31C, 31D, 31F, 31J, 34 and 44 of the Act (as amended by the Insurance Legislation Amendment Act 1989) provide for certain matters to be prescribed in regulations for purposes of the Act. The amending regulations address the following matters raised by the amendments to the Act.
Section 9 contains definitions of a number of words and expressions for purposes of the Act. Regulations may prescribe a class of persons for purposes of the definition of approved auditor.
Sections 25A and 31J provide that where a registered intermediary has arranged, during a particular accounting period, a contract of general insurance with an unauthorised foreign insurer, the intermediary shall furnish to the Commissioner a return, in respect of that period. This return is to be accompanied by a report of an approved auditor. Regulations may prescribe the form which the return should take and the requirements of the auditor’s report.
Section 31B provides that in order to conduct business as a foreign insurance agent, a person must be registered as either a broker or a foreign insurance agent and they must have in force a contract of insurance indemnifying them in respect of any prescribed liabilities. Regulations may prescribe liabilities for the purposes of subparagraphs 31B(1)(a)(ii) and 31B(1)(b)(ii).
Section 31C specifies how an application for registration should be made and provides penalties for false or misleading information submitted in connection with an application. Regulations may prescribe the form which the application should take.
Section 31D specifies the requirements which must be observed by an applicant for registration as a foreign insurance agent, including requirements to take out indemnity insurance (if prescribed), to furnish certain documents and to pay such registration fee as is prescribed. Regulations may prescribe the fees to be paid by applicants for registration.
Section 31F makes provision for public inspection of a number of documents lodged with or kept by the Commissioner. Regulations may prescribe the manner of application and the fees for inspecting and making copies of, or taking extracts from, such documents.
Section 34 requires an insurance intermediary arranging or effecting a contract of general insurance, to obtain an acknowledgement from an intending insured that the contract is to be arranged or effected with, or partly with, an unauthorised foreign insurer. Prior to the amendment, insurance intermediaries had only been required to give a notice to the intending insured to this effect. Regulations may prescribe the form of the acknowledgement to be obtained by the insurance intermediary.
Section 44 provides that regulations may make provision as to the inspection or audit of the books, accounts and records kept by registered insurance brokers or registered foreign insurance agents.
Amendments to paragraph 19(1)(b) of the Act made by the Statute Law (Miscellaneous Provisions) Act (No.2) 1986 altered the terminology used in that paragraph and also clarified the ability to prescribe in regulations the extent of the indemnity required by a registered insurance broker under a contract of professional indemnity insurance. Regulations may now prescribe the extent of the indemnity.
In addition, the amending regulations include a number of minor amendments designed to improve the administrative machinery and to bring the Insurance (Agents and Brokers) Regulations into line with the definition of approved auditor in the Insurance (Agents and Brokers) Act and the administrative arrangements established under the Insurance and Superannuation Commissioner Act 1987.
Details of the regulations are attached.
Insurance and Superannuation Commission
CANBERRA ACT
ATTACHMENT
DETAILS OF THE INSURANCE (AGENTS AND BROKERS) REGULATIONS (AMENDMENT)
Regulation 1 provides that, where the amending regulations refer to ‘Principal Regulations’, the reference is to the Insurance (Agents and Brokers) Regulations.
Regulation 2 amends Regulation 2 of the Principal Regulations to provide that a reference to a form by number refers to the form in the Schedule with that number.
Regulation 3 provides for the insertion of a new Regulation 2A in the Principal Regulations, specifying the class of persons for the purposes of the definition of ‘approved auditor’ in the Act.
Regulation 4 repeals Regulation 3 of the Principal Regulations and substitutes the following new regulations:-
- Regulation 3 prescribes liabilities for the purposes of paragraph 19(1)(b) of the Act. The liabilities set down are those incurred as a result of a breach of professional duty.
- Regulation 3A specifies the extent of indemnity required under a contract of insurance in respect of the prescribed liabilities arising out of or in the course of the broker’s business as an insurance intermediary.
Regulation 5 amends Regulation 4 of the Principal Regulations to provide for Form 1 to be the prescribed form in which application for registration as a broker is to be made.
Regulation 6 amends Regulation 5 of the Principal Regulations to take account of the definition of ‘approved auditor’ inserted in the Act earlier this year, and to provide that a copy of the contract of insurance required under paragraph 19(1)(b), where arranged by an insurance intermediary acting under a binder, can be certified by that intermediary.
Regulation 7 amends Regulation 7 of the Principal Regulations by omitting the requirement that a registered broker inform the Commissioner of any change in the address for service of documents. Consequential changes following from the Insurance and Superannuation Commissioner Act 1987 have also been made.
Regulation 8 amends Regulation 9 of the Principal Regulations (which provides for the inspection and copying of documents lodged with or maintained by the Commissioner) to also enable public access to foreign agency agreements and the annual returns lodged in respect of a registered intermediary’s business as an insurance intermediary.
Regulation 9 inserts the following new provisions in the Principal Regulations:-
- Regulation 9A prescribes Form 2 as the annual return of business as an insurance intermediary required to be lodged by registered insurance brokers for the purposes of paragraph 25A(2)(a) of the Act.
- Regulation 9B sets out the requirements of the report by an approved auditor in respect of the annual return to be lodged by registered insurance brokers.
Regulation 10 inserts a number of new provisions in the Principal Regulations as follows:-
- Regulation 10A prescribes that liabilities incurred as a result of a breach of professional duty are prescribed liabilities for the purposes of subparagraphs 31B(1)(a)(ii) and 31B(1)(b)(ii) of the Act.
- Regulation 10B specifies, for the purposes of subparagraph 31B(1)(a)(ii) of the Act, the extent of indemnity required under a contract of insurance in respect of the prescribed liabilities arising out of or in the course of a registered insurance broker’s business as an insurance intermediary.
- Regulation 10C specifies, for the purposes of subparagraph 31B(1)(b)(ii) of the Act, the extent of indemnity required under a contract of insurance in respect of the prescribed liabilities arising out of or in the course of a registered foreign insurance agent’s business as an insurance intermediary.
- Regulation 10D prescribes Form 3 as the form in which application for registration as a foreign insurance agent is to be made. It includes such details as the name and address of the applicant, particulars in respect of professional indemnity insurance cover, whether the applicant has been convicted of a relevant offence, and information on the applicant’s auditor.
- Regulation 10E provides for the application to be accompanied by a copy of the contract of professional indemnity insurance required for the purposes of subparagraph 31B(1)(b)(ii) of the Act, or details of the contract certified by the insurer, approved auditor or, where arranged by an intermediary acting under a binder, that intermediary.
- Regulation 10F prescribes the fee to be paid by an applicant for registration as a foreign insurance agent. A sole proprietor is to pay $350. A corporation is to pay $700 and an applicant wishing to carry on business as a registered foreign insurance agent in partnership is to pay the corporation fee divided by the number of partners.
- Regulation 10G requires a registered foreign insurance agent to inform the Commissioner of changes in the names and addresses used in respect of the agent’s business and provides for a penalty of up to $500 if such changes are not notified within 21 days of their occurrence.
- Regulation 10H specifies that an application to inspect, make copies of, or take extracts from, the documents listed in section 31F shall be made in writing.
- Regulation 10J provides for a fee of $5 to inspect a document listed in section 31F and a fee of 40 cents for each page copied.
- Regulation 10K prescribes Form 2 as the annual return of business as an insurance intermediary required to be lodged by registered foreign insurance agents for the purposes of paragraph 31J(2)(a) of the Act.
- Regulation 10L sets out the requirements of the report of an approved auditor in respect of the annual return to be lodged by registered foreign insurance agents.
Regulation 11 repeals Regulations 11, 12 and 13 of the Principal Regulations and substitutes the following new regulations:-
- Regulation 11 prescribes Form 4 as the form of the acknowledgement required to be made by an insured that a contract of insurance may be placed with a foreign insurer that is not authorised to carry on insurance business in Australia. It also requires the acknowledgement to be in a document separate from the contract of insurance and specifies a minimum height for the letters in the acknowledgement.
- Regulation 12 requires that, where an audit of the accounts of a registered insurance broker’s business as an insurance intermediary is carried out, the broker must obtain a report from an approved auditor. The report must contain certain statements and disclosures, and the registered insurance broker must, if requested, give the Commissioner a copy of the report.
- Regulation 13 requires that, where an audit of the accounts of a registered foreign insurance agent’s business as an insurance intermediary is carried out, the registered foreign insurance agent must obtain a report from an approved auditor. The report must contain certain statements and disclosures, and the registered foreign insurance agent must, if requested, give the Commissioner a copy of the report.
Regulation 12 amends Regulation 14 of the Principal Regulations, relating to the inspection of the books, accounts and records of a registered insurance broker, by extending its provisions to cover registered foreign insurance agents. Consequential changes following from the Insurance and Superannuation Commissioner Act 1987 have also been made.
Regulation 13 repeals the Schedules to the Principal Regulations and substitutes a new Schedule. The new Schedule contains the following forms:
- Form 1- application for registration as an insurance broker;
- Form 2- annual return of business as insurance intermediary;
- Form 3- application for registration as a foreign insurance agent; and,
- Form 4- acknowledgement by an insured that an insurer is or may be an unauthorised foreign insurer.