EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO. 339
INSURANCE (AGENTS AND BROKERS) REGULATIONS
ISSUED BY 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; minimising practices harmful to the insuring public and maintaining standards of conduct of, and quality of advice offered by, agents and brokers.
Section 48 of the Act provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Section 26 of the Act provides that a registered insurance broker shall pay into an ‘insurance broking account’ maintained with a bank all moneys received from an insured or intending insured for an insurer, or from an insurer for an insured or intending insured. While the purposes for which moneys may be withdrawn from that account are limited, sub section 26(4) provides for the investment of moneys received from an insured (or intending insured) in connection with a contract of insurance (not being a contract of life insurance) arranged or effected (or to be arranged or effected) by the broker.
Amendments to Regulation 10 were introduced in December 1986 to expand the range of investments available to a registered insurance broker to invest funds received from an insured or intending insured for general insurance contracts. As part of these amendments, definitions of ‘member’ and ‘stock exchange’ were included. The definition of ‘stock exchange’ provided that it have the same meaning as it has in the Securities Industry Act 1980. Section 4(1) of that Act in turn defines a stock exchange as a ‘body corporate that is approved by the Ministerial Council under section 38’ of the
Act. Since the Australian Stock Exchange and National Guarantee Fund Act 1987 came into operation on 1 April 1987, the Australian Stock Exchange Limited (ASX) has been approved under section 38 as a body corporate for the purposes of the Act. However, prior to 1 April, there was no approved body corporate under that section. Furthermore, an anomaly has arisen as three stock exchanges - the Ballarat Stock Exchange, the Bendigo Stock Exchange and the Stock Exchange of Newcastle Limited - are not part of the ASX. Members of those stock exchanges, who are not also members of the ASX, were therefore not included in the definitions of ‘stock exchange’ or ‘member’ in the Regulations.
The amendments to Regulation 10 clarify which stock exchanges came within the definition during the period between the commencement of the amended Regulation 10 and the establishment of the ASX, and expand the definition to include the three stock exchanges not part of the ASX.
Details of the regulation are attached.
Insurance and Superannuation Commission
CANBERRA ACT
ATTACHMENT
DETAILS OF AMENDED REGULATION 10
Sub regulation (1) defines an ‘approved bank’ as a bank within the meaning of the Banking Act 1959 and a State Bank. It also defines an ‘authorised dealer in the short term money market’ in terms of the Banking (Savings Banks) Regulations and a stock exchange and a member of same by reference to a list of stock exchanges.
Sub regulation (2) sets out the investments prescribed for the investment of funds received by a registered insurance broker from an insured or intending insured for general (as distinct from life) insurance contracts. These comprise:
(a) securities issued or guaranteed by the Commonwealth, a State or the Northern Territory;
(b) securities issued by an authority constituted by or under a Commonwealth Act, a State Act or a Territory law;
(c) deposits with an approved bank;
(d) deposits with, or shares in, a building society with trustee status in a State or Territory;
(e) negotiable instruments (other than cheques) issued, accepted, drawn or endorsed by an approved bank;
(f) deposits with an authorised dealer in the short term money market;
(g) cash management trusts in existence on 1 July 1986. These generally invest their trust fund in investments of the type referred to above as well as deposits with, and negotiable instruments guaranteed by, wholly-owned subsidiaries or approved banks; and
(h) cash management trusts which may be established in the future by wholly-owned subsidiaries of approved banks, registered life insurers and members of stock exchanges.