Australia: Doing Business in Australia - Insurance

Last Updated: 1 May 2012
Article by Tony Holland


Australia operates a dual regulatory system, with prudential regulation of insurers being the responsibility of the Australian Prudential Regulation Authority (APRA) and consumer protection being the responsibility of the Australian Securities and Investments Commission (ASIC). APRA is responsible for the authorisation and ongoing prudential supervision of insurers. Any new insurer wishing to write business in Australia must receive authorisation from APRA to do so. APRA issues prudential standards that provide the principles which form the basis for authorisation and ongoing supervision of insurers. These principles include requirements in relation to capital adequacy and solvency, corporate governance, risk management and reinsurance management. The prudential standards have the force of law. All APRA-authorised insurers are subject to annual prudential review, which requires the participation of their board. All APRA-regulated insurers have ongoing data collection obligations.

ASIC is responsible for the licensing of insurers and insurance intermediaries, as well as the monitoring and supervision of consumer rights in relation to financial services, including insurance.

There are significant compliance obligations imposed on participants in the financial services sector in connection with APRA and ASIC supervision. The compliance obligations are frequently revised and updated. For instance capital adequacy standards for some insurers were revised in December 2011. In early 2012, capital adequacy standards for other insurers were reviewed. With this goes an expectation that directors of an Australian insurance company will have a full understanding of compliance and regulatory issues relevant to the business carried on in Australia.

General insurance

Carrying on business as a general insurer or a reinsurer in Australia requires an authorisation from APRA in accordance with the Insurance Act 1973 (Cth) (Insurance Act). Only bodies corporate (or Lloyd's underwriters) are eligible for authorisation.

Since 1 July 2008, direct offshore foreign insurers carrying on insurance business in Australia, either directly or through the actions of another (for example, an insurance agent or broker) have required authorisation, unless they are only insuring risks that are within limited exemptions. It is an offence to carry on insurance business in Australia or undertake business incidental to carrying on insurance business in Australia without authorisation from APRA.

Also, an insurance intermediary cannot place insurance business with an unauthorised insurer. Regulations that provide for specific, but limited, exemptions from this prohibition came into force in 1 July 2008.

An authorised insurer must hold capital that meets minimum capital requirements set out in APRA's prudential standards.

APRA has a grading system for insurers where prudential requirements vary according to the size and risk profile of each insurer. If an insurer has reinsured with an offshore reinsurer that is not APRA-regulated, the APRA-authorised insurer is required to hold capital to match unsecured recoverables unless the offshore reinsurer has lodged security in Australia.

The Insurance Act does not apply to all forms of insurance. Life insurance, workers compensation and motor vehicle compulsory third-party personal injury insurance are regulated by separate legislation. Workers compensation and compulsory third-party motor insurance are regulated on a state and territory basis and typically a separate licence is required to participate in these classes. In some states and territories these risks are either provided for by state-controlled funds or state insurance entities – they are not available for private sector competition.

Medical indemnity insurance

Since the passage of the Medical Indemnity Act 2002 (Cth), medical indemnity insurance (also known as medical malpractice insurance) must be written by an APRA-authorised general insurer only and may not be provided on a discretionary unlimited basis. ASIC also has a regulatory role in respect of medical indemnity insurance, being responsible for the general administration of product standards and disclosure requirements that apply to medical indemnity insurance policies. These include the minimum cover limit that an insurer may offer or provide to a medical practitioner and the requirement that the contract provides an offer for retroactive and run-off cover for otherwise uncovered prior incidents.

Life insurance

All companies wishing to carry on life insurance business in Australia must be authorised by APRA in accordance with the Life Insurance Act 1995 (Cth) (Life Insurance Act). Life insurance business includes traditional whole-of-life insurance and endowment policies, continuous disability policies, contracts for the provision of annuities and investment-linked contracts. The Life Insurance Act requires the life insurer to act in the interests of the prospective and existing policyholders of the relevant statutory funds.

With limited exceptions, a foreign life insurance company must establish a subsidiary in Australia and have it authorised by APRA. All life insurance business in Australia must be conducted through the subsidiary.

In early 2012, APRA was reviewing and updating its capital standards for life insurers.

Health insurance

Private health insurance is provided through organisations registered under the Private Health Insurance Act 2007 (Cth). This Act together with the related rules define health insurance and who can offer it, and establish the regulatory regime for private health insurance providers. The financial performance of registered health funds is monitored by the Private Health Insurance Administration Council (PHIAC), an independent Federal Government body, to ensure solvency and capital adequacy requirements are met. PHIAC also monitors compliance with the rules. There are presently three rules in force:

  • Private Health Insurance (Health Benefits Fund Administration) Rules
  • Private Health Insurance (Insurer Obligations) Rules
  • Private Health Insurance (Risk Equalisation Administration) Rules.

The Private Health Insurance Ombudsman is an independent body established to resolve complaints about a private health fund, a broker, a hospital, a medical practitioner, a dentist or other practitioners (as long as the complaint relates to private health insurance) and to be the umpire in dispute resolution at all levels within the private health insurance industry. The Ombudsman's services are available to health fund members, hospitals, medical practitioners (including some dentists) as well as health funds.

Other relevant acts

Financial Sector (Shareholdings) Act 1998 (Cth): Ownership in insurers (life and general) is governed by the Financial Sector (Shareholdings) Act 1998 (Cth), which limits shareholdings of an individual shareholder or a group of associated shareholders in an insurer to 15% of the insurer's voting shares. A higher percentage limit may be approved by the Treasurer on national interest grounds. APRA provides assistance to the Treasurer in this process.

Insurance Acquisitions and Takeovers Act 1991 (Cth): This Act sets out rules for acquisitions of Australian companies authorised to carry on business of insurance under the Insurance Act or the Life Insurance Act. Notification requirements are triggered by the acquisition of assets and agreements with directors. The Act requires notification of certain proposals to be provided to the Treasurer.

Foreign Acquisitions and Takeovers Act 1975 (Cth): This Act is administered by the Foreign Investment Review Board (FIRB) and requires the notification of and approval for certain increases in substantial shareholdings in an Australian company by a foreign interest. FIRB operates independently of the Insurance Acquisitions and Takeovers Act 1991 (Cth).

Terrorism Insurance Act 2003 (Cth): This Act provides terrorism cover where eligible general insurance policies have a terrorism exclusion. It also establishes the Australian Reinsurance Pool Corporation (ARPC). Private residential property is excluded from the ARPC scheme, which allows insurers to choose whether to reinsure or bear the terrorism risk themselves. Contracts eligible for the ARPC scheme include insurance for loss or damage to the insured's commercial property, business interruption and insurance for liability arising from ownership or occupation of eligible property. Every three years the Treasurer reviews the need for the Act to continue and recommends refinements. A review is scheduled for late 2012.


The Insurance Contracts Act 1984 (Cth) (IC Act) regulates the content of general, life and medical indemnity insurance contracts. The most important exclusions are contracts of reinsurance, insurance covered by the Marine Insurance Act 1909 (Cth), workers compensation, compulsory insurance (for example third-party motor vehicle insurance) and state and Northern Territory insurance.

The IC Act does not codify the law, but lays down extensive rules in a number of areas, for example:

  • The statutory duty of disclosure on insureds (of which the insurer must inform the insured) and an insurer can only avoid the contract for non-disclosure or misrepresentation in limited circumstances.
  • Insureds must be clearly informed if cover is less than the standard prescribed cover in certain classes (eg home contents, motor vehicle, property damage).
  • The insurer must clearly inform the insured of terms that are not usually included in similar policies or if it is not able to rely on them.
  • Insurers can only refuse to pay claims under instalment policies if an instalment of premium has remained unpaid for 14 days and the insurer has clearly informed the insured, before or at the time the contract was entered into, that it may refuse to pay claims for non-payment.
  • Persons who are not parties to the policy may in some circumstances be entitled to recover from the insurer.
  • Renewal notices must be given to insureds.
  • The requirement to give notice of cancellation and limits cancellation rights.
  • The insurer's right to refuse to pay claims is limited, for example it cannot refuse to pay if there is a breach of a term of the contract requiring an act by the insured. Claim payments can only be reduced to the extent of any prejudice.

Medical indemnity insurance contracts

The suite of specific legislation governing medical indemnity insurance contracts includes the Medical Indemnity Act 2002 (Cth), the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (Cth) and the Medical Indemnity (Run-Off Cover Support Payment) Act 2004 (Cth).

General Insurance Code of Practice

The General Insurance Code of Practice (Code) is self-regulatory. It requires insurers to adopt standards for the treatment of insurance claims and sets out minimum service standards to customers. This code also requires agent and employee training, plain English and comprehensible documentation, and complaints handling and dispute resolution procedures. An estimated 90% of general insurers in Australia have signed up to the Code. The Code is monitored by the Financial Ombudsman Office to ensure participants meet the Code's required standards. Some insurance products, such as workers' compensation, medical indemnity and marine, are not covered by this Code.

Life Insurance Code of Practice

Dealing with the design, distribution and marketing of life insurance products, the Code of Practice for Advising, Selling and Complaints Handling in the Life Insurance Industry regulates all conduct of life insurers as well as life brokers and life insurance advisers. APRA also issues life insurance circulars regulating various matters, including disclosure requirements and policy illustration rates.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.