Since 1 January 2022, handling and settling insurance claims has been a financial service in Australia. Insurers, claims managers acting for insurers, fulfilment providers with authority to reject claims, claimant intermediaries and some brokers need an AFS licence with a claims handling authorisation. Every licensee must handle claims efficiently, honestly and fairly.
This article is general information, not legal or compliance advice. Check the current text of the code, standard or legislation, and take advice for your situation.
Key takeaways
- The change followed the Hayne Royal Commission, which led to the removal of claims handling's exclusion from the definition of a financial service.
- According to ASIC, five categories must hold a claims handling authorisation, including insurers and insurance claims managers.
- Loss assessors, investigators, and builders or repairers without authority to reject claims are generally exempt.
- According to ASIC, handling claims efficiently, honestly and fairly generally means doing so in a timely, least intrusive, fair and transparent way.
- ASIC's Report 768 reviewed 218,256 home insurance claims and found areas for improvement in communication, resourcing and the treatment of vulnerable consumers.
What changed for claims handling in Australia?
From 1 January 2022, claims handling and settling became a financial service under the Corporations Act. Before then, it was excluded from the definition of a financial service. The change came from the Government's response to the Hayne Royal Commission, so the people and businesses handling claims now carry AFS licence obligations.
According to ASIC, claims handling and settling services were "previously" excluded, and that exclusion "was removed as part of the Government's response" to the Royal Commission. The law took effect through the Financial Sector Reform (Hayne Royal Commission Response) Act 2020.
The obligations reach claims already in progress. According to ASIC's INFO 253, they apply to any claim made on or after 1 January 2021 that was still open after 31 December 2021. They also apply to Australian claims handled outside Australia.
Who needs an AFS licence to handle claims?
Five categories need an AFS licence with a claims handling authorisation, unless an exemption applies. They are insurers, insurance fulfilment providers with authority to reject claims, insurance claims managers acting for insurers, claimant intermediaries paid to represent insured people, and insurance brokers that handle and settle claims on behalf of the insurer.
- Insurer. Who it covers: The issuer of the insurance product.
- Insurance fulfilment provider. Who it covers: A supplier that satisfies an insurer's liability and has authority to reject all or part of a claim.
- Insurance claims manager. Who it covers: A business handling claims on behalf of one or more insurers.
- Claimant intermediary. Who it covers: A business paid to represent insured people in general insurance claims.
- Insurance broker. Who it covers: A broker that handles and settles claims on behalf of the insurer.
Many people involved in claims are exempt. ASIC's examples include loss assessors and adjusters, expert specialists such as engineers, investigators, independent medical examiners, and builders or smash repairers without authority to reject claims. Lawyers providing professional legal services are also specifically exempt.
For TPAs, the claims manager category is the one to check. A TPA handling claims for an insurer as a business usually falls within it. The guide to TPAs covers the role in more detail.
What obligations come with a claims handling authorisation?
A claims handling licensee takes on the general AFS licence obligations. The central one is to provide its services efficiently, honestly and fairly. It must also have internal dispute resolution that meets ASIC's standards, belong to AFCA, report breaches, have adequate resources and supervise its representatives.
ASIC has said what "efficiently, honestly and fairly" means for claims. According to ASIC, a licensee will generally need to handle claims "in a timely way", "in the least onerous and intrusive way possible", "fairly and transparently", and in a way that supports consumers experiencing vulnerability or financial hardship.
Timeliness includes oversight of suppliers. ASIC expects a licensee to oversee fulfilment providers acting for it "to ensure they do not cause delays". It also treats industry code timeframes as "useful indicators" of appropriate standards. The Code claims obligations guide sets those out.
What has ASIC found about claims handling?
ASIC's Report 768, published in August 2023, reviewed 218,256 home insurance claims lodged with six insurers between 1 January and 31 March 2022. It found both good and poor practices at all six. It named five areas for improvement: communication, project management, recognising complaints, treating vulnerable consumers, and resourcing.
The six insurers held 63% of the general insurance market, according to the report. Of the claims reviewed, 43% related to severe weather events, including the 2022 floods.
Resourcing stood out. ASIC found an overall increase in claims resourcing, "albeit with a significantly increased reliance on temporary staff". It also found "under-resourcing of dispute resolution", and asked insurers to address it immediately.
What does the regime mean for claims operations?
For claims operations, the regime means every step of a claim must be defensible as efficient, honest and fair. Teams need to show they acted without undue delay, asked only for information they needed, oversaw suppliers and supported vulnerable claimants. That depends on a complete record of each claim, from first notice of loss to close.
Records are the practical test. When ASIC or AFCA reviews a claim, the file shows what was done and when. Gaps in the file are hard to explain afterwards.
ClaimsGateway (claimsgateway.com) covers the claim from first notice of loss to close, so each claim's history sits in one record. Its security and compliance page describes its approach. No system makes a licensee compliant; the process, the people and oversight still decide that.
Frequently asked questions
Is claims handling a financial service?
Yes, in Australia, since 1 January 2022. Claims handling and settling became a financial service under the Corporations Act after the Hayne Royal Commission. Insurers, claims managers, some fulfilment providers, claimant intermediaries and some brokers now need an AFS licence with a claims handling authorisation, unless an exemption applies.
Do TPAs need an AFSL?
Often, yes. A TPA that handles claims on behalf of one or more insurers as a business usually falls within the insurance claims manager category, so it needs an AFS licence with a claims handling authorisation, or to be authorised by someone who holds one. TPAs should take advice on their own position.
What does "efficiently, honestly and fairly" mean for claims?
According to ASIC's INFO 253, it generally means handling claims in a timely way, in the least onerous and intrusive way possible, fairly and transparently, and in a way that supports consumers experiencing vulnerability or financial hardship. It includes overseeing suppliers so they do not cause delays.
What is ASIC Report 768?
ASIC Report 768, "Navigating the storm", is ASIC's August 2023 review of home insurance claims. It covered 218,256 claims lodged with six insurers in early 2022. It found good and poor practices at all six, with improvement needed in communication, project management, complaints, vulnerability and resourcing.
Do brokers need a claims handling authorisation?
It depends on the work. According to ASIC, a broker that handles and settles claims on behalf of the insurer needs a claims handling authorisation. Brokers are exempt from the claimant intermediary category, so helping their own clients with claims does not, on its own, require one. Brokers should take advice.
About the author
ClaimsGateway builds cloud claims management software for insurers, underwriting agencies, brokers, TPAs and self-insured organisations in Australia and New Zealand. Every regulator figure in this article links to its source, and every vendor fact was checked on the vendor's own site on the date shown.
Related reading
- Code of Practice timeframes: a quick reference to claims deadlines.
- AFCA and claims disputes: what drives complaints and how to reduce them.
- APRA CPS 230 and claims: what operational risk rules mean for claims.
Sources
- ASIC. "Claims handling and settling: How to comply with your AFS licence obligations (INFO 253)." Published 16 June 2025. https://download.asic.gov.au/media/q2ybygwo/info253-published-16-june-2025.pdf
- ASIC. "Report 768: Navigating the storm: ASIC's review of home insurance claims." 16 August 2023. https://download.asic.gov.au/media/tgrozota/rep768-published-16-august-2023.pdf
- Financial Sector Reform (Hayne Royal Commission Response) Act 2020, Schedule 7, as referenced in INFO 253.
