Digitalization in Insurance Guide | Australia | Asia Pacific Insurance

Is there any specific regulation governing the sale of insurance through online platforms?

No. The law in Australia is 'technology neutral' (ASIC RG 255.6). To sell insurance that includes digital advice (digital advice is automated financial product advice using algorithms without the direct involvement of a human advisor) the insurer must obtain a license to do so and must act within the terms of that license (as must its authorised representatives). To the extent that the sale of insurance involves the provision of digital advice, or hybrid advice, the Regulator (Australian Securities and Investment Commission aka. ASIC) has issued Regulatory Guide (RG) 10.255.

Is the sale of insurance through mobile applications subject to the same requirements as the online sale?

Yes.

Set out three key regulatory requirements for the distributions of products online or through mobile applications.

If selling "digital advice" (i) there is an obligation that there be people within the business who have an understanding of the technology and algorithms used to provide the digital advice, and are able to review the digital advice generated by the algorithms (RG 255.61; RG 255.110-RG.113) (ii) The licensee must have sufficient technological resources to maintain client records and data integrity, protect confidential information, meet current and anticipated needs including in relation to system capacity, and have adequate business continuity, backup and disaster recovery plans for any systems that support the delivery of digital advice. The licensee must comply with all legal obligations (RG 255.66 and 255.67) and, if there is an outsourcing of functions that relate to the digital advice business there must be (iii) measures in place to ensure due skill and care is taken in choosing the service provider and to monitor the ongoing performance of that provider.

Do the current insurance regulations in your jurisdiction allow the KYC process be done online or electronically? If so, what are the key requirements?

The law in Australia is 'technology neutral' (ASIC RG 255.6) and the Know Your Client obligations are set out in the Corporations Act 2001 and other legislation and guidelines.

Do the insurance regulations permit insurance policies/contracts to be concluded through digital means? For example, through a “click-through” or “e-signature”, without any wet signature.

The law in Australia is 'technology neutral' so the same requirements for the inception of a policy apply as they would if not digital in nature. It is a matter for the digital license holder to ensure that verification is compliant.

Section 10 of the Electronic Transactions Act 1999 (Cth) governs the use of electronic payments and provides the requirements to be met in place of a signature.

Is there any specific regulation governing the advertising of insurance products through online platforms or the use of aggregators?

No. The Corporations Act 2001 and the Australian Consumer Law govern misleading statements and the disclosures that are required of all insurance products irrespective of being online or not.

Are there any customer service requirements if the insurers sell their products online?

No. Customer service requirements are the same as if the products were not sold online. The risk management framework however, of the AFSL holder must take into account the risk of hacking, cloud storage and confidentiality which are all matters that are the subject of regulatory guidelines under the Corporations Act 2001, ASIC and APRA guidelines.

If an obligation is imposed on insurers to allow customers to amend or update their policies online, are there any specific regulatory requirements governing that process?

The process is not regulated but the ability to amend and update policies is dependant on the type of insurance product that is being sold and the legislation that governs it. Commonly, there are obligations upon insureds to disclose matters that are relevant to the insurer's decision to insure them and that may materially affect the risk insured.

Are insurers required to apply for specific insurance licenses in order to conduct online sales?

Where digital advice is being provided of a personal nature, it is expected that the regulator will require disclosure of this and that licenses will be required for this.

In order to conduct online sales, are insurance intermediaries required to apply for any specific insurance licenses?

No. Insurance intermediaries must act within the terms of the AFSL holder's license and to the extent that this does not occur, the AFSL holder will be liable. There will usually be indemnities contained in the agreement between the AFSL licensee and the intermediary (Authorised Representative) that reimburse the AFSL holder for any damages or compensation arising from the breaches of the Authorised Representative (intermediary).

Are there specific requirements on the commission rates paid to insurance intermediaries for online sales? Please specify if these rates are different from the rates applicable in the case of insurance sale through other means.

There are no specific requirements.

Where the insurers do not engage in online insurance sales themselves, but engage intermediaries to do so, would the insurers be deemed as offering or selling insurance products online?

Yes. The AFS licensee who outsources functions remains responsible for the financial services provided (RG 255.70) and licensees are liable for the acts of their authorised representatives (Corporations Act 2001 (Cth) sections 917A-F).

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