Insurance Act 1973

Parts I and II shall come into operation on the day on which this Act receives the Royal Assent.

The remaining provisions of this Act shall come into operation on such date as is, or on such dates as respectively are, fixed by Proclamation.

The main objects of this Act are:

to protect the interests of policyholders and prospective policyholders under insurance policies (issued by general insurers and Lloyd’s underwriters) in ways that are consistent with the continued development of a viable, competitive and innovative insurance industry; and

to promote financial system stability in Australia.

This Act, and the prudential standards determined by APRA under this Act, achieve this mainly by:

restricting who can carry on insurance business in Australia by requiring general insurers, and the directors and senior management of general insurers, to meet certain suitability requirements; and

imposing primary responsibility for protecting the interests of policyholders on the directors and senior management of general insurers; and

imposing on general insurers requirements to promote prudent management of their insurance business (including requirements concerning capital adequacy, the valuation of liabilities, reinsurance arrangements and the effectiveness of risk management strategies and techniques); and

providing for the prudential supervision of general insurers by APRA; and

providing for APRA to manage or respond to circumstances in which the ability of a general insurer to meet its obligations may be threatened; and

providing for certain policyholders to be paid amounts where the financial claims scheme has been declared to apply in relation to a general insurer.

Generally, the provisions of this Act apply to general insurers. However, there are a number of special provisions that apply only to Lloyd’s underwriters.

For the purposes of this Act, insurance business does not include undertaking liability under a contract of insurance, or a kind of contract of insurance:

specified in the regulations for the purposes of this subsection; or

in circumstances specified in the regulations for the purposes of this subsection.

Without limiting subsection (1), the regulations may specify a contract of insurance, a kind of contract of insurance, or circumstances, by reference to:

particular general insurance products (within the meaning of the Corporations Act 2001), or particular kinds of such products; or

particular persons, or particular kinds of persons, who are insured under a contract of insurance, or a kind of contract of insurance.

Without limiting subsection (1):

the regulations may specify a contract of insurance, a kind of contract of insurance, or circumstances, by reference to:

a decision of APRA or a person; or

a certificate or other document issued by APRA or a person; and

if the regulations do so—the regulations may impose obligations on APRA or the person in relation to the decision, certificate or other document.

a general insurer and its subsidiaries together constitute a relevant group of bodies corporate; and

an authorised NOHC and its subsidiaries together also constitute a relevant group of bodies corporate.

This Act does not apply to State insurance whether or not extending beyond the limits of the State concerned.

This Act does not apply to or with respect to insurance business carried on by:

the Commonwealth (including the Territories); or

a body corporate prescribed by the regulations; or

a body corporate, being insurance business of a kind prescribed by the regulations.

APRA may, in writing, determine that any or all of the following provisions of this Act do not apply to a person while the determination is in force:

a provision of Part III (other than a provision of Division 3A of that Part);

section 35;

section 39;

section 41;

a provision of Division 3 or 4 of Part IV;

section 49Q;

section 117;

section 118;

section 120;

section 121.

The determination may:

be expressed to apply to a particular person or to a class of persons; and

specify the period during which the determination is in force; and

be made subject to specified conditions.

If APRA makes a determination that applies to a particular person, APRA must also give the person written notice of the determination.

APRA may, in writing, vary or revoke a determination under this section.

The following instruments made under this section are not legislative instruments:

a determination that applies to a particular person;

an instrument varying or revoking a determination that applies to a particular person.

Otherwise, an instrument made under this section is a legislative instrument.

Part VI applies to the following decisions made under this section:

a refusal to determine that one or more provisions of this Act do not apply to a particular person;

a decision to impose conditions on, or specify a period in, a determination made under this section in relation to a particular person;

a decision to vary or revoke a determination made under this section in relation to a particular person.

A person commits an offence if:

the person does an act or fails to do an act; and

doing the act or failing to do the act results in a breach of a condition to which a determination in force under subsection 7(1) is subject; and

the determination applies to the person.

An offence against this section is an offence of strict liability.

For strict liability, see section 6.1 of the Criminal Code.

Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

If a body corporate is convicted of an offence against this section, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a fine of up to 5 times the penalty above.

Subject to subsections (2) and (3), APRA has the general administration of this Act.

ASIC has the general administration of section 114.

The Minister may give APRA or ASIC directions about the performance or exercise of its functions or powers under this Act.