(Re)Insurance and Regulation Focus - fortnight commencing 7 July 2025
08 July 2025
Key developments in the last fortnight
CPS 230 goes live!!
The day is finally here (or has been and gone by the time you’re seeing this) – APRA Prudential Standard CPS 230: Operational Risk Management is now live. To celebrate the occasion, APRA have released electronic forms for regulated entities to complete when notifying APRA of operational risk incidents, breaches of critical operation tolerances and any new or changes to existing material arrangements or offshoring. FUN! Despite the commencement date passing on 1 July 2025, prudentially regulated entities are reminded that the work is not over. Pre-existing contractual arrangements must be uplifted to comply with the service provider provisions of CPS 230 from the earlier of the renewal date of the agreement, or 1 July 2026. Regulated entities should ensure that material agreements and their renewal dates are identified and recorded to ensure that they are not missed. For material agreements that do not renew in the 12 months, review and amendments should start with enough time to ensure that all material agreements are compliant by the 1 July 2026 deadline.
APRA’s new prudential standard on operational risk management comes into force
ASIC appeals recent UCT findings
ASIC has appealed the ruling of the Federal Court in October 2024 that a ‘pre-existing condition’ term used in HCF Life’s products was not unfair due to the operation of s 47 of the Insurance Contracts Act. ASIC alleges that the term in question seemingly allowed HCF Life to deny coverage for a customer’s failure to disclose a pre-existing condition prior to entering into the contract in circumstances where a diagnosis had not been made, and suggested HCF Life could deny coverage even where the customer was not aware of the pre-existing condition. Whilst finding that the term was misleading, the Court found that it was not an unfair contract term. The Court considered that the statutory obligations imposed on insurers limited the potential imbalance of power caused by the questionable term. ASIC is appealing on the basis of concerns that unfair contract terms can be cured by legislation that reasonable customers would be ignorant of, and that misleading terms can also be found not to be unfair. The appeal decision will potentially set a further important precedent for the application of the unfair contract terms regime.
Massive fine for thousands of claim denials by Bupa
Bupa has come to an agreement with the ACCC to pay a total penalty of $35 million regarding its denial of thousands of legitimate claims over a period of more than five years. Bupa admitted to the ACCC that it had engaged in misleading and deceptive conduct by making false representations to members that they were not entitled to claim benefits in circumstances where they were. Most of the claims were for hospital treatment, with multiple procedures performed at the same time, and where part of the treatment was covered and part of the treatment was not covered, Bupa rejected the entire claim. Bupa also admitted to unconscionable conduct relating to a number of these claims. These failures were caused due to improper training practices as well as systems issues that caused incorrect assessments. The penalties are yet to be approved by the Court, with the ACCC also seeking a court enforceable undertaking that Bupa continue compensating customers through its remediation programs.
Informed consent in focus as commencement date quickly approaches
ASIC’s new informed consent obligations for insurance brokers commences on 9 July. These new obligations require insurance brokers that sell general insurance, life risk insurance or consumer credit insurance products to retail clients, whilst providing (or being likely to provide) personal advice, to obtain and record their client’s informed consent to receive commission before issuing or selling the policy. Brokers are also required to provide their clients with a written record of their consent as soon as practicable after receiving the consent. There are some exceptions for renewals and business transfers. A failure to comply will constitute a contravention of the ban on conflicted remuneration. Not good. If you are a broker wanting to avoid a civil penalty, a banning order, or AFS licence suspension or cancellation (ASIC’s available penalties for this type of breach) please reach out to our team for assistance.
FAQs: Informed consents for insurance commissions
Further relief wind back reportable situations regime
ASIC has provided further relief for financial services and credit licensees from the reportable situations regime following industry feedback. The relief is designed to reduce the reporting burden on licensed entities. The relief exempts licensees from reporting certain breaches of the misleading or deceptive conduct provisions and certain contraventions of civil penalty provisions. The relief also broadens the type of reports that are exempt, by increasing the time allowed for rectification from the occurrence of the breach to 60 days, the number of impacted customers to 10 and the total financial loss to $1,000. If a breach is rectified within the timeframe and does not reach the impact thresholds, the breach will not be reportable. However, if one of these thresholds is exceeded, the breach will be reportable. The relief also provides that a report will be taken to have been lodged where it has been lodged with APRA provided it contains all information APRA requires.
ASIC gives further relief for licensees under the reportable situations regime
APRA’s stakeholder survey a resounding success
APRA’s latest stakeholder survey has shown that 97% of banks, insurers and superannuation trustees believe that APRA’s supervision benefits their respective industries. APRA surveyed 262 entities with a response rate of 70%. Responses included positive findings that APRA’s supervision enhanced the financial and operational strength of respondent’s organisations, that APRA’s prudential requirements positively impacted respondent’s financial management, and that APRA was providing sufficient opportunity for consultation with industry and standards and guidance. However, feedback was negative when asked if APRA’s prudential framework sufficiently considered the costs of regulation imposed on industry. APRA’s chair has stated that “[t]hese reflections, alongside feedback we receive from our stakeholders across industry, government and regulatory sector, are contributing to our thinking as we develop our priorities for next financial year in an environment of heightened risk."
AUSTRAC sets regulatory expectations under AML/CTF reforms
AUSTRAC CEO Brendan Thomas has released a statement of regulatory expectations, setting out specific expectations for both current reporting entities and tranche 2 entities under the reforms to the AML/CTF Act, which commences on 31 March 2026 for current reporting entities and 1 July 2026 for tranche 2 entities including businesses in the legal, accounting professions and real estate industries that are newly coming under regulation. While AUSTRAC does not expect perfection on day one, it encourages existing reporting entities to maintain their focus on reducing money laundering risks and uplifting existing systems and processes for risk managing to ensure effectiveness, and for tranche 2 entities, it expects honest efforts to meet AML obligations. AUSTRAC will publish regulatory priorities for 2025-26 and a timeline of regulatory expectations for implementation of the reforms in July 2025 to assists entities plan ahead and will provide guidance, education and industry forums to prepare them for success.
AUSTRAC regulatory expectations for the implementation of the AML/CTF reforms
Key dates
- 27 June 2025 – APRA releases CPS 230 notification forms.
- 22 July 2025 – consultation closes on ASIC’s paper on the regulation of employee redundancy funds.
- 22 July 2025 – APRA’s Insurance in Super Summit.
- 21 August 2025 – Insurance Business Australia’s Women in Insurance Summit.
In case you missed it
Last week Matt Ellis participated in a webinar with the National Insurance Brokers Association on the requirements to seek informed consent for insurance commission.
