Both Australia and New Zealand already have legislation in place to protect consumer rights and ensure customers get a fair go. But new laws coming into effect early next year go much further in those protections — and will require considerable preparation on the part of insurers.

FAR replaces BEAR in Australia

The Financial Accountability Regime (FAR) was given the go-ahead by the Australian Parliament in September last year. The legislation, which implements a number of recommendations made by the banking royal commission, replaces the current Banking Executive Accountability Regime (BEAR) and will apply to insurers from 15 March 2025. 

Similar to the BEAR, the FAR imposes obligations in four core areas: accountability, notification, key personnel and deferred remuneration. However, it extends the provisions to all entities regulated by the Australian Prudential Regulation Authority (APRA). 

“The FAR will also introduce new expectations for insurers and their most senior executives by requiring them to conduct their activities in accordance with broader obligations such as integrity, skill and co-operation with regulators,” says Alexandra Hordern, general manager, Regulatory and Consumer Policy, at the Insurance Council of Australia (ICA). 

Australia’s Assistant Treasurer and Minister for Financial Services, Stephen Jones, pointed out in a media release that decisions made by financial services executives have an impact on the lives of all Australians. 

“The FAR ensures that these institutions [banks, insurers and superannuation funds] clearly identify individuals who will be held accountable for the actions of the organisation,” he said.

“An executive who breaches these obligations can be penalised with a loss of income, disqualification from working in the sector and individual civil penalties for assisting in the organisation’s contravention of its obligations.”

Joint APRA and ASIC administration

Unlike the BEAR, which is supervised solely by APRA, the FAR will be jointly administered by APRA and the Australian Securities and Investments Commission (ASIC). ASIC will focus on impacts to market integrity and consumer protection in the financial and payments systems, while APRA will oversee the prudential soundness of regulated entities and overall financial stability.

“Just as the BEAR has helped to sharpen risk culture and governance in the banking sector, we expect the FAR to have a similar positive impact in improving standards of accountability across insurance and superannuation,” said APRA deputy chair Margaret Cole in a media release. 

The ICA is keen to see a robust, fit-for-purpose and right-sized regulatory system that provides the best-possible outcomes for consumers at what are often very challenging times in their lives. 

“The FAR differs from the General Insurance Code of Practice, which centres on customer interactions with insurers, but the two systems will work together to enhance industry culture and customer support,” says Hordern.

What should insurers be doing now?

Implementing any new regulatory regime will inevitably bring challenges.

“It requires teams to understand the changes and test and evaluate existing systems to ensure they meet the new requirements,” says Hordern. 

Raymond Giblett, Sydney-based partner of law firm Norton Rose Fulbright, believes there are lessons to be learned from the implementation of the BEAR in 2018. 

“This needed substantial investment in resources and time across the business, the board and senior executive teams,” he says. 

Giblett recommends that insurers take the following six actions to ensure they’re ready to implement the FAR.

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