Insurance (Agents and Brokers) Regulations (Amendment) 1998 No. 190
EXPLANATORY MEMORANDUM
Statutory Rules 1998 No. 190
Minute No. 190 of 1998 - Treasurer
Subject - Insurance (Agents and Brokers) Act 1984
Insurance (Agents and Brokers) Regulations (Amendment)
The Insurance (Agents and Brokers) Act 1984 (the Act) and the Insurance (Agents and Brokers) Regulations provide for the efficient and fair operation of the insurance industry by ensuring that standards of conduct between intermediaries and consumers are such that there is fair dealing and that any complaints that arise are dealt with promptly and efficiently.
Section 48 of the Act provides that the Governor-General may make Regulations, not inconsistent with the Act, prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act. The proposed amendments will:
* amend the regulations consequential on the Financial Sector Reform
* legislation which was recently enacted, by:
- omitting references to the Insurance and Superannuation Commissioner,
* a position which will be abolished on 1 July 1998, and replacing them
* with references to the Australian Securities and Investments Commission
* (ASIC), which will take on the consumer protection and market integrity
* functions of the Insurance and Superannuation Commissioner (proposed
* Regulations 5, 7-8, 11 - 12, 14 - 16);
- omitting regulations which have no function after the commencement of
* the Financial Sector Reform legislation- (proposed Regulations 17 - 19);
* amend regulations relating to the prescription of forms, as a consequence
* of the commencement of the Insurance Laws Amendment Act 1998
* (proposed Regulations 10, 13 and 20);
* update Regulation 10 which relates to the prescribed manner of investing
(proposed Regulation 2 and 9);
* provide specifically for registration renewal fees which have previously been
levied using the initial registration fee provisions (proposed Regulation 6); and
* omit unnecessary words in a regulation regarding registered company auditors
(proposed Regulation 4).
As indicated above, some of the proposed amendments to the regulations are consequential to, the Financial Sector Reform legislation which was recently enacted. The Financial Sector Reform legislation is the Government's response to the report of the Financial System Inquiry (the Wallis Committee) and includes the Australian Prudential Regulation Authority Act 1998, the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 and the Financial Sector Reform (Consequential Amendments) Act 1998.
To the extent that it is relevant to the amendments to the Insurance (Agents and Brokers) Regulations, the Financial Sector Reform legislation:
* abolishes the Insurance and Superannuation Commissioner;
* establishes the Australian Prudential Regulation Authority to undertake the
prudential regulation of deposit-taking institutions, insurance companies and
superannuation entities; and
* enlarges the role of the Australian Securities Commission, which is renamed the
Australian Securities and Investments Commission, so that it oversees
consumer protection and market integrity in the financial sector (including
superannuation and insurance).
The role of the Insurance and Superannuation Commissioner is thus divided between the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. In addition, these bodies receive certain functions previously carried out by the Reserve Bank and the Australian Competition and Consumer Commission respectively.
Details of the proposed regulations are attached - Attachment A.
The proposed amendments will commence on 1 July 1998.
The Office of Regulation Review has advised that there is no need for a Regulation Impact Statement in relation to these amendments.
The Minute recommends that the Regulations be made in the form proposed.
Authority: Section 48 of the Insurance (Agents and Brokers) Act 1984.
ATTACHMENT A
Proposed Regulation 1 - Commencement
Proposed Regulation 1 provides that the regulations commence on 1 July 1998.
Proposed Regulation 2 - Amendment
Proposed Regulation 2 provides that the Insurance (Agents and Brokers) Regulations are amended as set out in these regulations.
Proposed Regulation 3 - Regulation 2 (Definitions)
Proposed Regulation 3 inserts a definition of 'ADP (authorised deposit-taking institution), a term which is used in proposed Regulation 9.
Proposed Regulation 4 - Regulation 2A (Approved auditors)
Regulation 2A currently refers to a person being a registered company auditor 'in a State or Territory'. Under the Corporations Law, the status of registered company auditor is not limited to a particular State or Territory.
Proposed Regulation 4 will therefore omit the words 'in a State or Territory'.
Proposed Regulations 5, 7, 8, 11, 12, 14, 15 and 16 - Regulations 2B, 7, 9, 10G. 10J, 12, 13 and 14 (references to Insurance and Superannuation Commissioner)
Regulations 2B, 7, 9, 10G, 10J, 12, 13 and 14 include references to the Insurance and Superannuation Commissioner who currently has regulatory responsibility for this Act.
These references are to functions which, with the commencement of the Financial Sector Reform legislation, will be undertaken by the Australian Securities and Investments Commission (ASIC).
Proposed Regulations 5, 7, 8, 11, 12, 14, 15 and 16 amend these references to refer instead to ASIC.
Proposed Regulation 6 - New Regulation 6AA (Registration Renewal)
Section 21 of the Act provides for the registration and annual renewal of registration of insurance brokers, including a fee, to be prescribed by regulations. A fee for initial registration was prescribed some years ago and this fee has been levied on both initial registration and renewal. The proposed amendment prescribes this fee as the fee payable for registration renewal as well. This will not involve a new expense for brokers, as the renewal fee has been levied for some years already.
This proposed regulation inserts after Regulation 6 the fee structure for the renewal of registration of brokers. The fee structure is the same as that for the registration of brokers, Regulation 6.
Proposed Regulation 9 - Regulation 10 (Prescribed manner of investing (s 26(4) of the Act)
Part III of the Act deals with the registration of brokers and includes provisions concerning the insurance broking accounts maintained by insurance brokers.
The Insurance Laws Amendment Act 1998, which commenced on 30 April 1998, amended the Act to allow insurance broking accounts to be maintained with all building societies, and with credit unions. Consistent with this, the prescribed manner of investments for insurance broking account monies, for the purposes of subsection 26(4) of the Act, must now include deposits with credit unions and with all building societies. The proposed amendment to Regulation 10, which prescribes the manner of investing, makes these changes.
There were also references in Regulation 10 to certain banks and other institutions which either no longer exist or which no longer function. The proposed amendment to Regulation 10 deletes references to these institutions.
Proposed Regulations 10 and 20 - Regulation 10D (Prescribed form - subsection 31C(2) of the Act) and Schedule (Forms).
Part IIIA of the Act deals with the registration of foreign insurance agents. The form of application for registration as a foreign insurance agent, (subsection 31C(2) of the Act), and the form and manner of the acknowledgment by insureds that their insurance contract is with an unauthorised foreign insurer (subsection 34(1)(c) of the Act), are no longer to be prescribed, as a result of the Insurance Laws Amendment Act 1998. They are currently approved by the Commissioner under subsection 31C, and from 1 July 1998 will be approved by ASIC (who will take over responsibility for this function on the commencement of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998).
The forms were approved by the Commissioner on 4 May 1998. The instrument of approval of form No. 1 of 1998, was tabled in both Houses of Parliament on 14 May 1998 and was gazetted on 20 May 1998, as required for disallowable instruments by the Acts Interpretation Act 1901. The instrument approves the form for applications for registration and renewal of registration (general and life insurance brokers, and foreign insurance brokers, and foreign insurance agents under section 20 and 3 1 C of the Act).
Regulation 10D, which previously prescribed these forms, is omitted, as are the forms themselves (previously Forms 3 and 4 of Schedule 1 to the Regulations) by these Regulation amendments.
Proposed Regulation 13 - Regulation 11 (Prescribed form of acknowledgment paragraph 34(1)(c) of the Act).
The form of application for the form and manner of the acknowledgment by insureds that their insurance contract is with an unauthorised foreign insurer is currently approved by the Commissioner under paragraph 34(1)(c) of the Act.
From 1 July 1998 the form will be approved by ASIC, following the commencement of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998, which allocates responsibility for this section to ASIC.
Regulation 11 is consequently omitted by these proposed amendments.
Proposed Regulations 17-19 - Regulations 15. 16 and 17 (Financial sector supervisory agencies, law enforcement agencies and overseas financial sector supervisory agencies
Current Regulations 15, 16 and 17 prescribe particular financial sector supervisory agencies, law enforcement agencies and overseas financial sector supervisory agencies for the purpose of section 34U of the Act (which relates to secrecy).
Section 34U of the Act is repealed by Item 11, Schedule 10 of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 because the Australian Securities and Investments Commission, which will have regulatory responsibility for this Act after 1 July 1998 is subject to secrecy and disclosure provisions in the Australian Securities and Investments Commission Act 1989.
Proposed Regulations 17 to 19 will omit Regulations 15 to 17.