(Re)Insurance & Regulation Focus - week commencing 3 February 2025
04 February 2025
Three key developments over the last fortnight
CGC doubles down on penalties for Code breach
The Code Governance Committee (CGC) has imposed a penalty of $100,000, which is double the amount of its first sanction in June 2024, against an anonymous insurer for failures relating to the handling of claims and customer complaints following operational changes. Interestingly, the CGC has elected not to name the insurer in this case citing its “proactive and effective response” to the breaches, which has drawn significant criticism from consumer groups calling for greater transparency. Insurers to watch this space going forward as it seems likely that the CGC is continuing to develop its approach to breaches of the Code.
Insurer handed $100,000 penalty over code breach - Insurance News - insuranceNEWS.com.au
ASIC key focuses for 2025 target persistent and emerging issues for insurers
In its 2025 key issues outlook, ASIC has expressed concern around the persistent nature of issues stemming from the delivery of claims handling and settling services following natural disasters and the poor outcomes this generates for households. The ongoing nature of this issue and the increase in natural disasters has resulted in ASIC promising to monitor the sector closely throughout this year. Operational and cyber resilience of industry participants was also identified as a key issue for 2025, with ASIC again putting directors on the hook to ensure that risk management frameworks adequately addresses cyber security threats and that controls are in place to protect and enhance cyber resilience. These findings should be considered particularly closely by accountable persons under the FAR regime.
Key issues outlook 2025 | ASIC
Significant penalties awarded in first DDO case
The Federal Court has ordered Firstmac Limited to pay $8 million in penalties for “objectively reckless” conduct in failing to meet its obligations under the design and distribution obligations (DDO). The Court found that Firstmac’s actions in cross-selling marketing of their financial products without taking reasonable steps to ensure that customers were within the scope of the target market of the products “courted the risk” of inappropriate distribution. This judgment should serve as a cautionary reminder to issuers and distributors to closely consider compliance with DDO throughout the distribution process. In the words of ASIC Chair, Joe Longo published 24 January 2025, “[c]ompliance with the DDO is essential to protect customers.”
Key dates on the horizon
- 17 February 2025 – submissions due to APRA’s consultation in relation to adjustments to the general insurance reinsurance framework. In response to reinsurance market developments and industry feedback, APRA is seeking to promote access to all forms of reinsurance and reduce regulatory burden.
- 15 March 2025 – Financial Accountability Regime will apply to insurers and superannuation entities.
- 31 March 2025 – over in New Zealand, the Financial Markets (Conduct of Institutions) Amendment Act 2022 (the CoFI Act) will come fully into force. The CoFI Act is the result of extensive reviews by the primary regulators of the financial services industry in New Zealand and is designed to ensure that consumers are at the forefront of institutions’ decisions and actions going forward.
In case you missed it
The Sparke Helmore team presented to a packed audience of upwards of 200 market participants on the key issues for delegated underwriting arrangements in 2025. Thanks to the Underwriting Agencies Council for inviting us! Recording available soon.