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22-034MR ASIC streamlines process for insurers to provide consumers cash in emergency situations
ASIC has issued legislative relief that allows insurers to give emergency payments to consumers in certain circumstances without first giving them a Cash Settlement Fact Sheet (CSFS).
The relief formally came into effect on 11 February 2022. Insurers can apply the streamlined process to emergency payments for insured consumers impacted by the current catastrophic severe weather and flooding in Queensland and Northern NSW.
A CSFS is a written document that insurers must give to consumers when they are offered a cash settlement, setting out the options available to settle their claim. A CSFS must outline the options available to a consumer, for example having their goods repaired or replaced, or receiving a cash payment.
The relief streamlines the process for insurers to advance consumers up to $5,000 in cash in emergency situations without first having to issue a CSFS. Having to provide a written CSFS when a cash settlement of up to $5,000 is offered may delay payments to consumers who need immediate access to small amounts of cash in urgent or emergency situations.
The relief applies in limited circumstances where:
- the consumer has expressly instructed the insurer or its representative that they need immediate financial assistance
- the verbal cash settlement offer has been made within 14 days of the insurable event that is the subject of the claim, and
- the cash payment (together with any additional immediate cash payments under the same claim) does not exceed $5,000.
The relief is subject to conditions and will expire in 2025. ASIC will review the operation and appropriateness of the instrument before it expires.
The Financial Sector Reform (Hayne Royal Commission Response) Act 2020 introduced a new disclosure obligation into the Corporations Act 2001 requiring Australian Financial Services licensees (or their authorised representatives) that provide claims handling and settling services to give a CSFS in certain circumstances. The CSFS obligation commenced on 1 January 2022.
The CSFS obligation aims to ensure that insureds have sufficient information about the cash settlement offer to make an informed decision about whether to accept the offer.
A CSFS must contain certain prescribed information. Australian Financial Services licensees or representatives must give a CSFS to insureds who are offered a cash payment to settle part or all of a general insurance claim when the insured has a choice between a cash settlement and other settlement options. The CSFS must be given in writing when the cash settlement offer is made.
The relief was granted following an application for relief from the Insurance Council of Australia (ICA). ASIC consulted with various industry, consumer and government stakeholders before deciding to grant the relief. A no action position has been in place since 1 January while ASIC considered and consulted on the relief application.
Further information about claims handling and settling obligations can be found in INFO 253: Claims handling and settling: How to comply with your AFS licence obligations