Overview

The Insurance determination allowing extra time for claims No. 1 of 2010 was enacted by the Australian Prudential Regulation Authority (APRA) under the authority provided by the Insurance Act 1973. This determination was introduced to address the potential issue of policyholders not lodging their claims under the Financial Claims Scheme (FCS) for insolvent general insurers before the initial claim period expired. Specifically, the FCS was invoked for Australian Family Assurance Limited (AustFam) by the Minister for Financial Services, Superannuation and Corporate Law under subsection 62ZZC(1) of the Act on 15 October 2009, with the claim period originally set to close on 15 October 2010. Given the complexity and potential unawareness of certain policyholders regarding the claim process, APRA extended the claim period by 12 months to ensure that all eligible policyholders had sufficient time to make their claims. This extension aims to provide additional support and protection to policyholders affected by the insolvency of AustFam.

Scope and Application

The Insurance Act 1973, specifically under section 62ZZA(1), empowers the Australian Prudential Regulation Authority (APRA) to extend the period within which policyholders can make claims under the Financial Claims Scheme (FCS) in the event of an insolvent general insurer. In the case of Australian Family Assurance Limited (AustFam), declared insolvent and under judicial management, the Minister for Financial Services, Superannuation and Corporate Law invoked the FCS on 15 October 2009. Initially, the claims period was set to conclude on 15 October 2010, but APRA, recognising potential delays in policyholders lodging their claims, issued Insurance Act determination No. 1 of 2010 to extend this period by a further 12 months. This extension applies to all individuals with valid claims associated with certain protected policies issued by AustFam. The extension is a direct measure to ensure that affected policyholders are not disadvantaged by unforeseen circumstances and have sufficient time to lodge their claims under the FCS. The authority to extend the claims period is thus exercised to provide a more equitable outcome for those impacted by the insurer's insolvency.

Key Provisions

The Insurance Act 1973, specifically section 62ZZA(1), allows the Australian Prudential Regulation Authority (APRA) to extend the period for making claims under the Financial Claims Scheme (FCS) for policyholders of insolvent general insurers. This provision was exercised in Insurance Act determination No. 1 of 2010, which extended the claim period for policyholders of Australian Family Assurance Limited (AustFam) by 12 months beyond the initial 12-month period set to end on 15 October 2010. This extension was intended to ensure that policyholders who may not have been aware of their entitlement or the claim process had sufficient time to make their claims. Under this Act, APRA is obligated to consider whether there are policyholders who might not yet have made their claims and to extend the claim period accordingly. In this case, APRA determined that extending the claim period would benefit affected policyholders by giving them additional time to submit their claims. Additionally, there is a requirement for APRA to consult with relevant parties, such as the liquidator of the insolvent insurer, to ensure that the determination is fair and appropriate. In the instance of AustFam, APRA consulted with the liquidator before making the determination to extend the claim period. The Act does not specify particular offences or penalties for failing to comply with the provisions of the FCS. However, the failure to submit a claim within the extended period could mean that policyholders forfeit their entitlement to receive compensation under the FCS. This could have significant financial implications for those who miss the deadline, as they would not be able to claim compensation through the FCS and would instead have to pursue their claims as ordinary creditors in the winding up of the insurer.