Insurance Act 1973

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.