EXPLANATORY STATEMENT
STATUTORY RULES 1985 NO. 368
INSURANCE (AGENTS AND BROKERS) REGULATIONS (AMENDMENT) ISSUED BY THE AUTHORITY OF THE MINISTER ASSISTING THE TREASURER
The Insurance (Agents and Brokers) Act 1984 (the Act) is designed to regulate the activities of insurance brokers and, to an extent, insurance agents.
The Act, which is largely based on recommendations made by the Law Reform Commission in its Report on Insurance Agents and Brokers, is aimed at regulating this area of the insurance industry with a view to strengthening the financial stability of the industry overall; protecting the insuring public against the negligence or misconduct of an agent or broker; the minimisation of practices harmful to the insuring public; and the maintenance of standards of conduct of, and quality of advice offered by, agents and brokers.
Parts of the Act came into operation on 25 June 1984, the day on which the Act received the Royal Assent. The remaining provisions, which relate, in the main, to the registration of insurance brokers, are to come into operation on such day as is, or such days as respectively are, fixed by Proclamation.
The proposed regulations are designed to amend the Insurance (Agents and Brokers) Regulations by the addition of further provisions. The latter Regulations are to take effect on the day that Part III of the Act obtains Proclamation. A Proclamation date of 1 January 1986 is being sought for Part III. The amending regulations are set to come into operation on 2 January 1986.
Sections 34 and 44 of the Act (which are in operation) provide that regulations may be made in respect of specific provisions in the Act.
Section 34 requires an insurance intermediary (either an agent or a broker), arranging or effecting a contract of general insurance, to give notice in writing to an intending insured that the contract is to be arranged or effected with an unauthorised foreign insurer (as defined) or, if that is not practicable, to give notice in writing to the insured as soon as it is reasonably practicable after the contract has been arranged or effected. Regulations may prescribe the form of the notice to be given 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.
A brief outline of the proposed regulations which complement the above provisions, and which carry out or give effect to the Act, is attached.
ATTACHMENT
DETAILS OF REGULATIONS
REGULATION 1 provides that, where the amending regulations refer to ‘Principal Regulations’, the reference means the Insurance (Agents and Brokers) Regulations,
REGULATION 2 provides for the amending regulations to come into operation on 2 January 1986, the day after the Insurance (Agents and Brokers) Regulations are to take effect,
REGULATION 3 inserts a number of provisions in the Insurance (Agents and Brokers) Regulations, as follows:
Regulation 11(1) prescribes the form of notice (set out as Schedule 2) which is to be given to the insured by an insurance intermediary where a contract of general insurance is arranged or effected with an unauthorised foreign insurer.
Regulation 11(2) requires the letters in the notice to be of not less than 2 millimeters in height.
Regulation 12(1) provides that a person is not to act as an auditor in respect of an insurance broking business, without the approval of the relevant Commissioner (which is the Insurance Commissioner in respect of general insurance business and the Life Insurance Commissioner in respect of life insurance business), if that person has an interest in the affairs of the broker that could conflict with the proper performance of that person’s functions as an auditor.
Regulation 12(2) requires an auditor of the business of a registered insurance broker to be a registered company auditor in a State or Territory.
Regulation 13(1) requires that, where an audit of the accounts of a registered insurance broker is carried out, the broker shall obtain a certificate from the auditor.
Regulation 13(2) provides that the certificate referred to in Regulation 13(1) shall state whether or not the accounts are in accordance with the Act, and have been properly kept and record and explain correctly the transactions and financial position, and whether or not the auditor has obtained information and explanations requested of the broker and is satisfied that the accounts appear to truly represent the transactions and financial position of the broker.
Regulation 13(3) requires a registered insurance broker to furnish the relevant Commissioner with a copy of the certificate referred to in Regulation 13(1) on request.
Regulation 14(1) provides that the relevant Commissioner or an authorised person may require a registered insurance broker, or an employee or agent of that broker to produce relevant books, accounts and records kept by the broker and may inspect, audit, and take extracts from and copy any such book, account or record.
Regulation 14(2) provides for a penalty of up to $500 if a registered insurance broker or his/her employee or agent fails, without reasonable excuse, to comply with Regulation 14 (1).
Regulation 14(3) defines ‘authorised person’ as a person authorised by the relevant Commissioner in writing for the purposes of Regulation 14(1).
REGULATION 4 provides for a Schedule 2, which contains the form of notice to be given by an insurance intermediary in respect of unauthorised foreign insurers, to be added to the Insurance (Agents and Brokers) Regulations.