A lack of clarity around new legislation for handling insurance claims has given many advisers the impression that they need to apply for a new AFSL, despite the vast majority being likely exempt from the rule.
On Friday ASIC released a draft information sheet for insurance claims handling that explained extra licensing requirements for “persons providing claims handling and settling services”, which included “financial advisers who handle claims on behalf of an insurer”.
The guidance was based on legislation introduced to parliament by Treasurer Josh Frydenberg on November 12, which sought to enhance consumer protections by making claims handling a financial service as per the recommendation of the Hayne Royal Commission.
While many advisers are concerned the new legislation will apply to them, only those working for insurers are likely to be impacted.
According to Financial Planning Association CEO Dante De Gori, ASIC’s release led to dozens of queries from advisers on Friday asking if they needed to apply for what ASIC call a “variation” to their existing AFS licence.
It’s almost certain, however, that regulation following the initial legislation will include an insert clarifying that licensed financial advisers who don’t work for an insurer will not be impacted, De Gori explains.
“We have been told by Treasury and other stakeholders that advisers not employed by insurers will be exempt,” De Gori tells Professional Planner. “The vast majority of financial advisers won’t be affected.”
ASIC’s guidance lacks context, De Gori says, which exacerbated the confusion. Yet he stops short of chastising the corporate regulator.
“ASIC are just trying to make sure they’re giving participants enough time to comply,” he says. “And they’re only working with what Treasury have given them. Arguably, more context should have been given, but this is only a draft from ASIC and they’re just starting the process.”
The CEO does reserve his ire for careless reporting by trade press on Friday, which intimated that all advisers would need to gain the additional authorisation.
“It’s disappointing that some journalists didn’t do their homework and have unnecessarily caused confusion and unnecessary anxiety on advisers,” he says.
No need to stress
Association of Financial Advisers CEO Phil Kewin says his team also received inquiries from advisers concerned that they would need to apply for a variation to their licence before the January, 2022 deadline.
“On Friday there was a lot of industry discussion and confusion,” he says. “But we’ve got to remember that this isn’t targeted at advisers.”
Kewin agrees that ASIC aren’t to blame for the confusion. “I think ASIC is limited by what the government has told them,” he says.
Treasury has given no indication of when the final regulation – and clarity about the affected parties – will be delivered. Kewin says while he “firmly” believes advisers not working for insurance companies will be exempt, they deserve certainty sooner rather than later.
“It’s unnecessary, and to many advisers it just adds to the list of things to worry about. If you look at the cost of an AFSL variation it can be up to $3000,” he says, adding that the AFA is lobbying the minister’s office and Treasury to address the confusion.
“While this may not see the most important thing to them, a few simple few lines can allay a lot of concerns for a lot of people,” Kewin says. “My strong hope is that advisers don’t stress about this, we’re working hard to get that clarity.”
