ASIC has extended the legislative relief that allows insurers and their representatives to give emergency payments to consumers, in certain circumstances, without first giving them a Cash Settlement Fact Sheet (CSFS).
The initial relief formally came into effect on 11 February 2022 and is due to expire on 11 February 2025.
ASIC conducted a review of the appropriateness of the relief and has decided to extend the relief with one minor amendment.
From 22 November 2024, insurers can use the streamlined process where the offer is made within 42 days of an insurable event, rather than 14 days. This change was made following industry feedback that consumers may not be able to make a claim within 14 days following a catastrophic event.
The relief streamlines the process for insurers to advance consumers up to $5,000 in cash in emergency situations without first having to issue a CSFS.
Having to provide a written CSFS when a cash settlement of up to $5,000 is offered may delay payments to consumers who need immediate access to small amounts of cash in urgent or emergency situations.
Insurers relying on the streamlined process will still need to provide the consumer with a CSFS after the cash settlement offer is made.
The relief applies in limited circumstances where:
- the consumer has expressly instructed the insurer or its representative that they need immediate financial assistance
- the verbal cash settlement offer has been made within 42 days of the insurable event that is the subject of the claim, and
- the cash payment (together with any additional immediate cash payments under the same claim) does not exceed $5,000.
The relief is subject to conditions and will expire in 2030. ASIC will review the operation and appropriateness of the instrument before it expires.
Whilst recent reviews including the General Insurance Code of Practice Independent Review and Flood failure to future fairness report have considered broader issues to do with the use of cash settlements, they have not made recommendations about the operation of this relief.
