Insurance (Agents and Brokers) Regulations (Amendment) 1995 No. 57
EXPLANATORY STATEMENT
Statutory Rules 1995 No. 57
Issued by the Authority of the Treasurer
Insurance (Agents and Brokers) Act 1984
Insurance (Agents and Brokers) Regulations (Amendment)
Section 48 of the Insurance (Agents and Brokers) Act 1984 provides that the Governor-General may make regulations, not inconsistent with the Act, that are required or permitted by the Act or are necessary or convenient to be prescribed for giving effect to the Act.
Section 4 of the Acts Interpretation Act 1901 provides for the exercise of certain powers between the passing and the commencement of an Act.
The Act provides that registered insurance intermediaries should hold professional indemnity insurance cover in respect of prescribed liabilities. The Insurance (Agents and Brokers) Regulations (Amendments) which came into effect on 1 October 1994 were intended, inter alia, to increase the minimum level of cover required from $500,000 to $1,000,000 for all registered insurance intermediaries.
The intention was that the minimum prescribed liability of $1,000,000 was to be applied only to the new and small business. For larger on-going business the level of cover required was to increase in proportion with the level of premiums received. However, the present drafting of regulation 3 could result in intermediaries being insured to a maximum of only $1,000,000.
The amending regulation clarifies the level of professional indemnity insurance required.
Overview
The Insurance (Agents and Brokers) Regulations (Amendment) 1995 No. 57, issued by the authority of the Treasurer, amends the existing regulations under the Insurance (Agents and Brokers) Act 1984. This amendment was introduced to address a drafting error in the existing regulations which potentially limited the professional indemnity insurance cover for registered insurance intermediaries. The original intent was to increase the minimum level of cover to $1,000,000 for new and small business, while allowing a proportional increase for larger ongoing business, but the initial regulation wording did not achieve this objective effectively. The purpose of this amendment is to rectify the wording so that the increased cover applies appropriately, ensuring that intermediaries are adequately protected in line with the intended policy objective of the Act.
Scope and Application
The Insurance (Agents and Brokers) Regulations (Amendment) 1995 applies to all registered insurance intermediaries in Australia, ensuring compliance with the requirements set out in the Insurance (Agents and Brokers) Act 1984. These regulations were introduced to amend the existing standards for professional indemnity insurance cover, specifically increasing the minimum cover for new and small business from $500,000 to $1,000,000. The amendments clarify that the prescribed minimum cover of $1,000,000 applies specifically to new and small business, while for larger ongoing business, the level of cover is to increase proportionately with the level of premiums received. The regulations are applicable nationally, aligning with the scope and jurisdiction of the Act. However, any further extension or restriction of application is made through subordinate instruments, ensuring that the insurance requirements are comprehensively addressed and effectively enforced across the insurance intermediary sector in Australia.
Key Provisions
The Insurance (Agents and Brokers) Regulations (Amendment) 1995 No. 57 (the "Regulations") amends the Insurance (Agents and Brokers) Regulations 1994 (the "Principal Regulations"). The Regulations amend regulation 3 of the Principal Regulations, which pertains to the minimum level of professional indemnity insurance cover that registered insurance intermediaries must hold. Under section 48 of the Insurance (Agents and Brokers) Act 1984, the Governor-General has the authority to make regulations that are necessary to give effect to the Act. Section 4 of the Acts Interpretation Act 1901 also allows for the exercise of certain powers between the passing and the commencement of an Act.
The Regulations clarify the level of professional indemnity insurance cover required by registered insurance intermediaries. Previously, the Principal Regulations set a minimum cover of $500,000 for all intermediaries, which was increased to $1,000,000 for new and small businesses. However, there was a drafting error in regulation 3 that could have resulted in intermediaries being insured to a maximum of only $1,000,000, regardless of the level of premiums received. The Regulations aim to rectify this issue by ensuring that the level of cover required for larger ongoing businesses increases in proportion with the level of premiums received.
The Regulations impose obligations on registered insurance intermediaries to ensure they hold professional indemnity insurance cover in respect of prescribed liabilities. Specifically, the Regulations require intermediaries to maintain a minimum level of cover, which is now set at $1,000,000 for new and small businesses and higher for larger ongoing businesses. Failure to comply with the Regulations may result in civil or criminal consequences. The Act does not specify the exact penalties for non-compliance; however, penalties for breaches of insurance regulations can include fines and imprisonment under section 103 of the Act.
The Regulations also provide a mechanism for the Governor-General to make further amendments to the Principal Regulations, ensuring that the level of cover required for intermediaries can be adjusted as necessary to reflect changes in the insurance industry and the risks associated with insurance intermediaries. The Regulations came into effect on 1 October 1994, and the amendments are intended to provide greater clarity and ensure that intermediaries are adequately protected and that policyholders are safeguarded.