On 2 June 2017, the Insurance Monitor published an order (“section 30 order”) under section 30 of the Emergency Services Levy Insurance Monitor Act 2016 (“the Act”) in the NSW Government Gazette. Guidance on the effect of the section 30 order (“Guidance”) was subsequently published on the Insurance Monitor’s website on 6 June 2017.
The following Frequently Asked Questions (“FAQs”) are provided to assist those companies which are required to comply with the order. In the following FAQs:
- a “policy” is a reference to a “regulated contract of insurance”. This is defined in the Act to mean any policy of insurance issued by an insurance company that belongs to a class of policies of insurance that are subject to contribution under the emergency services funding scheme, or is a combined or comprehensive policy of insurance that includes a policy of insurance belonging to such a class.
- A “relevant policy” is a reference to a “relevant regulated contract of insurance”, which is defined in note 12 of the Guidance as residential building insurance, residential contents insurance and any combination of the two.
- A reference to an insurance company includes those acting on behalf of the insurance company.
Frequently asked questions
The order became effective on 5 June 2017, the next business day after its publication in the NSW Government Gazette on 2 June 2017.
The section 30 order requires an insurance company, or persons acting on behalf of an insurance company, to include the information in the order, in all invoices or other statements that it issues to any person, as to the price payable for the issue of policies except for invoices or other statements issued that relate to new business or variations to existing policies. Therefore, the order relates to renewals of policies. This is referred to as the section 30 obligation.
Any order issued under section 30 of the Act applies to all policies.
For relevant policies, the Insurance Monitor expects insurance companies will comply fully with the obligation, unless otherwise agreed with the Insurance Monitor. The Insurance Monitor will allow insurance companies a period of up to 12 weeks from the date the obligation becomes effective, to achieve full compliance with the obligation.
For policies other than relevant policies also subject to the section 30 obligation, the Insurance Monitor will not undertake enforcement action regarding non-compliance unless further Guidance on the application of the obligation to these contracts has been issued.
The Act defines an insurance company as follows:
insurance company means a person, partnership, association or underwriter that:
- issues or undertakes liability under policies of insurance against loss of or damage to property situated in New South Wales, or
- receives premiums in respect of such policies of insurance on behalf of, or for transmission to, a person, partnership, association or underwriter outside New South Wales.
Yes. In the Insurance Monitor’s view, the phrase “persons acting on behalf of an insurance company” captures insurance brokers. This is because insurance brokers, by virtue of their receipt of commissions or brokerage fees from an insurance company, as a result of placing business with that company, have a commercial relationship with the relevant insurance company. To this extent, an insurance broker may be regarded as acting on behalf of the relevant insurance company.
An insurance broker may regard themselves to be acting in the best interests of the insured, however, this does not necessarily mean that the broker is not also acting on behalf of the insurance company.
No. The notice previously published on 12 May 2017 is now withdrawn. There is no further need to send this notice out to policyholders.
Refer to notes 5 and 6 in the Guidance. If you are already providing a renewal premium comparison details in substantially the same format as that shown under Option A when issuing a renewal policy, then Option B is available to you. In all other circumstances, you should be adopting Option A.
To provide flexibility, the information in both Options A and B can be provided on a separate page, enclosed and delivered with renewal documentation sent out to a policyholder, provided the existence of the information on the separate page is noted in the renewal documents where the premium is first mentioned.
The Insurance Monitor expects renewal premium comparisons to be shown on “like for like” basis unless there are specific problems that prevent the insurance company from doing so.
The Insurance Monitor is aware that mid-term variations and adjustments to policies may make a “like for like” comparison more difficult. Insurance companies should apply sound commercial judgment in deciding how best to provide a “like for like” comparison, that is meaningful and not misleading to the policyholder. Where considered helpful, insurance companies may include explanatory information below the renewal premium comparison to achieve this provided the explanatory information does not contradict the information in the section 30 order.
Yes. Refer note 7 of the Guidance. An insurance company may express the information in the order using alternative wording so long as the essence of the information is retained.
The Insurance Monitor notes that he had written to insurance companies as early as April 2016 setting out his expectations about the renewal premium comparison. These expectations were subsequently reiterated in the Guidelines on the prohibition against engaging in false and misleading conduct, published in September 2016.
Nevertheless, the Insurance Monitor appreciates that some insurance companies may still have problems with complying with the obligation in a timely manner. If you have concerns about your ability to comply, please write to the Insurance Monitor and provide information about the challenges you face and the amount of additional time that you may require to comply. The Insurance Monitor will consider all reasonable requests for extensions of time, as well as arrangements for delivering the information in the order retrospectively to policyholders.
The Insurance Monitor has indicated that a period of up to 12 weeks will be allowed for insurance companies to achieve full compliance. Compliance checks on relevant policies will therefore be undertaken at any time after that time.
The Insurance Monitor has the discretion to take enforcement action against any non-compliance of section 30. The maximum penalty for non-compliance is set at 200 penalty points, which currently equates to $22,000. The penalty applies to each individual instance of non-compliance.
In the event that amendments are made to the Act and those amendments affect the operation of the order, the Insurance Monitor will review the need to amend the order at the appropriate time.