Schedule 5: Insurance Premium Funding
Introduction
5.1 This Schedule applies to Insurance Premium Funding Products.
About Insurance Premium Funding Products
5.2 Insurance premium funding allows individuals or businesses to pay their insurance premiums in manageable monthly instalments instead of a lump sum.
5.3 Insurance premium funding is a finance arrangement where we pay the total annual premium of an insurance policy on your behalf. You then repay us in monthly instalments over a specified period, typically ranging from six to twelve months. This can relate to a single insurance premium or can allow for the consolidation of multiple insurance premiums into a single payment plan.
Obtaining an Insurance Premium Funding Product
5.4 We may allow you to apply for an Insurance Premium Funding Product in different ways, for example:
a. by applying to us directly (where we make this available to you);
b. by referral to us from another entity in our corporate group; or
c. being introduced to us by a finance or insurance broker or other adviser who is not part of our corporate group.
Terms and conditions for our Insurance Premium Funding Products
5.5 If you are proposing to obtain a contract for an Insurance Premium Funding Product with us, we will give you:
a. our terms and conditions;
b. a statement of our fees and charges; and
c. information pertaining to proposed remuneration to be paid to an Intermediary.
5.6 We will do this before a contract for an Insurance Premium Funding Product is made with us. This information may be provided in one or more separate documents.
5.7 The Insurance Premium Funding Product contract documentation will set out whether you can make an Early Repayment and the terms of that Early Repayment.
5.8 We will make sure any fees and charges payable to us because of the Insurance Premium Funding Product (such as Late Payment Fees or direct debit Dishonour Fees) are reasonable having regard to our costs.
5.9 We will regularly review the effectiveness of our disclosure of our fees and charges to you.
When we lend to you
5.10 When we lend to you, we:
a. expect you to provide honest and accurate information to us when applying for an Insurance Premium Funding Product or when applying to renew an existing Insurance Premium Funding Product;
b. will use a risk assessment process to assess whether the Insurance Premium Funding Product is suitable for your circumstances and meets your needs; and
c. will periodically review this risk assessment process and associated criteria for our Insurance Premium Funding Product.
Remuneration arrangements
5.11 We will offer only clear and transparent remuneration arrangements to our Representatives, Intermediaries or Intermediary Group (Broker Group) and/or Authorised Representative Network, and other third parties involved in the referral, marketing or distribution of our Insurance Premium Funding Product to you.
5.12 Where we pay Intermediary Remuneration in connection with an Insurance Premium Funding Product, before (or if this is not practicable, at the time) you enter into the Insurance Premium Funding Product contract, we will:
a. clearly tell you:
- the nature and type(s) of Intermediary Remuneration or other benefits that we are aware the Intermediary or Intermediary Group (Broker Group) and/or Authorised Representative Network is to receive in respect of, or that is attributable to, the service provided in relation to the Insurance Premium Funding Product that a reasonable person in the circumstances would consider could influence them in the provision of the service;
- when and how it is payable by us to them (e.g. if it is payable before or after acquiring the Insurance Premium Funding Product);
- such other information as required by law; and
b. answer any questions you have about the above.
5.13 Pursuant to clause 5.12, we will only pay:
a. a Commission to an Intermediary, and no other fees; or
b. a Service Fee to an Intermediary Group (Broker Group) and/or Authorised Representative Network, or licensee, except for where the licensee is an Intermediary.
5.14 We may pay an Intermediary Group (Broker Group) and/or Authorised Representative Network, or licensee a Commission instead of a Service Fee in limited circumstances, such as payment may be in addition to a Service Fee where there is a clear distinction in roles, or where additional services and value are provided, or where both the services of an Intermediary and/or an Intermediary Group (Broker Group) and/or Authorised Representative Network are offered.
5.15 Where we have entered into a Multi-year Agreement, it is expected these agreements contain termination clauses with a 60-day written notice period for termination by either party, unless the agreement requires a different notice period.
5.16 We will not pay any remuneration or benefit to an Intermediary and/or Intermediary Group (Broker Group) and/or Authorised Representative Network and/or Representative to the extent prohibited by law.
5.17 We will use best endeavours to require that our Representatives, Authorised Representative Network, Intermediaries and/or Intermediary Group (Broker Group) comply with relevant industry codes, particularly those aspects that relate to the management of conflicts of interest and the disclosure of remuneration or other benefits that the Intermediary and/or Representative is to receive in distributing the Insurance Premium Funding Product to you.
Information about our Insurance Premium Funding Product
5.18 On the first page of the agreement for the Insurance Premium Funding Product contract or the quote you accept, or on the digital screen we use to sell our product to you, we will clearly set out some key features of the proposed Insurance Premium Funding Product, including:
a. the term of the Insurance Premium Funding Product contract;
b. the loan amount;
c. the Total Cost of Credit, comprising the total of the interest expense, application fee, Intermediary Remuneration and any other fees;
d. the Total Repayment Amount, comprising the total of the loan amount and the Total Cost of Credit;
e. the Annual Percentage Rate (APR);
f. the Average Monthly Repayment;
g. any other information we think may assist you (including a Total Interest Percentage);
h. details of any security taken in consideration for the Insurance Premium Funding Product (if any); and
i. the steps that we could take if you default on a payment to us.
Explanation of the Annual Percentage Rate
5.19 We will provide you with information about the Annual Percentage Rate (APR) to accompany the disclosures in clause 5.18. This disclosure will be:
The APR is the rate that is used to calculate the cost of the loan taking account of the reducing balance of the Loan Amount, expressed as an annual rate. For the purposes of calculating the APR, the cost of the loan is exclusive of fees.
The APR is indicative and assumes the loan starts on the inception date of the insurance policy(ies) being funded. The Total Repayment Amount (including Application Fee) will not exceed the sum shown even though the APR will differ if the date of acceptance of the offer is later than the inception date of the insurance policy.
The APR is not a term of the offer and is provided to allow a simple comparison of insurance premium funding products.
Notifying changes to your Insurance Premium Funding Product
5.20 Subject to clause 5.21, or unless a longer period is required by law, we will give you at least thirty days' prior notice before we change your Insurance Premium Funding Product. However, any agreed changes can commence from the time the change is agreed with you, or from a later agreed time.
5.21 We may give you a shorter notice period, or no notice, if:
a. any default is unable to be remedied;
b. it is reasonable for us to do so to manage a material and immediate risk relating to the nature of the relevant default, your particular circumstances, or the value of the security; or
c. we have already given you a period to remedy the default, and you have not remedied that default.
5.22 Any commitment we may make to notify you by electronic methods is subject to you keeping us informed of, as applicable, your current electronic contact information.
Copies of documents, statements and other information
5.23 We will, at your request, give you a copy of:
a. the Insurance Premium Funding Product contract (including the terms and conditions, and the standard fees);
b. a statement of your outstanding balance; and
c. any notice we previously gave you which is relevant to us exercising our rights.
5.24 We will do this within ten Business Days of your request.
5.25 If, for some reason, we are unable to provide a document within these timeframes, we will advise you of this, together with the expected timeframe for providing the document.
5.26 Documents may be provided in electronic form, including in the form of a computer-generated record, or in any other form as mutually agreed.
Trained and competent representatives
5.27 We will make sure that our Representatives are well trained so that they can competently do their work and understand this Code and how to comply with this Code.
5.28 We will regularly review the effectiveness of our training programs for our Representatives. This includes:
a. having policies and procedures for our Representatives that require them to conduct their services appropriately;
b. only allow our Representatives to provide services that match their expertise;
c. require our Representatives to hold any licence the law requires;
d. require our Representatives, when they are providing a service to you, to tell you the service we have authorised them to provide and that they are acting on our behalf;
e. require our Representatives to first get our approval before subcontracting any services they perform on our behalf;
f. require our Representatives to tell us about any complaint received by them or breach of this Code by them when acting on our behalf, as soon as reasonably practicable but no later than two (2) Business Days;
g. require our Representatives to provide reasonable cooperation and make available to the CCC any information relevant to their and our compliance with the Code;
h. ensure records of our Representatives' training are kept for at least seven (7) years and make the records available for examination by the Code Compliance Committee on request
i. measure the effectiveness of our Representatives' training by appropriately monitoring their performance;
j. require additional or remedial training to address any identified deficiencies or improvements required in our Representatives' training and ongoing development; and
k. maintain and keep current a training and development plan for our Representatives that is appropriate for the services provided by them or to be provided by them in the future.
5.29 If we are aware that our Representative's performance does not meet the relevant standards of this Code, or you raise any concerns with us about the conduct of our Representatives, then we will address this. For example, we may terminate our contract with them, commence disciplinary action or require they undergo further training.
5.30 In respect of any Intermediary, Intermediary Group (Broker Group) and/or Authorised Representative Network we use, we will also ensure that:
a. we provide them with up-to-date information in relation to our products, services, policies and procedures;
b. they are kept informed of our hardship policies and processes;
c. they are aware of the need to tell us if a customer is at risk of or experiencing financial difficulties; and
d. they are aware they are to tell us about any complaint received by them in connection with our Insurance Premium Funding Product or service as soon as reasonably practicable but no later than two Business Days from the receipt of that complaint.
Definitions
The following are defined terms only for the purposes of this Schedule 5. If there is any inconsistency with AFIA Code Definitions, these definitions prevail in relation to Insurance Premium Funding Products.
Amount of Insurance Premium Funded means the amount of the loan that funds the Insurance Premium and may be less than the Loan Amount.
Annual Percentage Rate is the rate that can be used to calculate the cost of the loan taking account of the reducing balance of the Loan Amount, expressed as an annual rate. For the purposes of calculating the Annual Percentage Rate, the cost of the loan is exclusive of fees.
Average Monthly Payment is the Total Repayment Amount divided by the Term. The Average Monthly Payment amount does not include fees and other charges you can avoid, such as interest at a default interest rate on overdue amounts, Late Payment Fees and Dishonour Fees.
Commission is a payment made by a lender to an Intermediary in connection with an Insurance Premium Funding Product which may be a fixed percentage of the amount funded, and which is transparent and disclosable. A Commission will not be a variable percentage linked to increased volume. The Commission may be for the Intermediary's relevant transaction-related costs and/or quality assurance requirements (such as acting in the interests of the customer, improving business systems, undertaking training and maintaining adequate competency, improving quality and compliance of services, and maintaining adequate insurance) of which will be based on a calculation of genuine and relevant amounts.
Conflicted Remuneration means the following types of remuneration in connection with an Insurance Premium Funding Product:
| Conflicted Remuneration | Definition |
|---|---|
| Access and Exclusive Arrangement | Payment of a calculated amount, provision of a Soft Dollar Benefit or a structural advantage that is put in place (for fees or without fees) which unfairly promotes or favours an entity and/or limits the business activities of others and/or restricts or prevents an entity dealing with others. |
| Advanced Remuneration | Remuneration that is paid in advance to the Intermediary prior to the Intermediary providing the service. |
| Profitability/Income Share Arrangements | Payment of a calculated amount of remuneration based on a profitability hurdle or income share. For the avoidance of doubt, this does not prevent an ownership structure, joint venture and/or capital arrangement and payment between entities where the arrangement does not result in an Access and Exclusive Arrangement and the nature and interest of the arrangement is disclosed to the market by us. However, any such funding arrangements should be on commercial and arms-length terms. |
| Soft Dollar Benefit | All non-monetary remuneration that is provided by a lender to an Intermediary, Intermediary Group (Broker Group) or Authorised Representative Network, or similar, that is attributable to the distribution, referral or marketing of an Insurance Premium Funding Product and that such non-monetary remuneration is not otherwise excluded by law. A soft dollar benefit (such as, entertainment or gifts) should be reasonable in the circumstances and/or comprise benefits of less than $300 or an alternative threshold permitted for any 12-month period, providing identical or similar benefits are not given on a frequent or regular basis, such as numerous smaller benefits. All parties should retain a register for giving and receiving soft dollar benefits over $300 or an alternative threshold as already contained in corporate policies (or multiple smaller amounts the sum of which is greater than $300 or the alternative threshold within a 12-month period). Discretion should be exercised consistently with corporate expense delegations with regards to entertainment (such as, lunch meetings). |
| Over-ride Intermediary Remuneration | Extra remuneration paid by a lender on top of Commission or Service Fees. |
| Volume-Based Incentive (VBI) | A volume-based incentive is one where access to the incentive, or the value of the incentive, is dependent on the total number or value of Insurance Premium Funding Products that are recommended by our Representatives, Intermediary, Intermediary Group (Broker Group) and/or Authorised Representative Network |
Early Repayment means the early repayment of the loan amount, as well as the payment of all amounts that you are required to pay under the Insurance Premium Funding Product contract.
Fees means all fees payable, or that may become payable, by you to the lender under the Insurance Premium Funding Product contract.
Insurance Premium means the amount to be paid for a contract for insurance.
Intermediary means an AFSL holder or a corporate authorised representative of an AFSL holder involved in the execution of a transaction relating to the Insurance Premium Funding Product but excludes any Intermediary Group (Broker Group) and/or Authorised Representative Network. The meaning can also include licensees and insurance brokers.
Intermediary Group (Broker Group) and/or Authorised Representative Network means a parent company, with subsidiaries, members, affiliated companies, corporate authorised representatives, or a company which is an AFSL holder and is part of a larger multinational broker group, with proprietary systems or dedicated insurance premium funding teams to provide services to a lender.
Intermediary Remuneration means the commission payment made to an Intermediary in connection with the Insurance Premium Funding Product and which is related to the distribution, referral or marketing of the Insurance Premium Funding Product by that Intermediary. It also encompasses remuneration to a Representative.
Loan Amount is the total amount of the finance made available, or to be made available, under the Insurance Premium Funding Product contract.
Multi-year Agreement means an agreement between a lender and an Intermediary, an Intermediary Group (Broker Group) and/or Authorised Representative Network.
Representatives means our staff, agents and representatives.
Service Fee is a payment that relates to an exchange of value for agreed services between entities, such as a lender and an Intermediary Group (Broker Group) and/or Authorised Representative Network in connection with an insurance premium funding product. This payment may relate to the genuine reimbursement of relevant costs otherwise associated with the distribution, referral or marketing of the Insurance Premium Funding Product (such as administration, accounting, payments processing, data management, training, marketing, and information technology software or support).
A Service Fee should be a fixed amount and should not be adjusted to include any volume-based incentives (such as, an increasing percentage or additional dollar payment based on the number of Insurance Premium Funding Product contracts originated). A Service Fee should be paid on an agreed schedule (such as, monthly, quarterly or yearly) and in arrears. Where a Service Fee is paid, it must be commercial in nature. When a Service Fee is paid, it will be disclosed to the customer by us.
Total Cost of Credit is the total amount paid by a customer in Interest Expenses, Application Fees, Intermediary Remuneration and Other Fees for the Insurance Premium Funding Product. The amount does not include fees and other charges that are capable of being avoided, such as default interest charges arising from overdue amounts, Late Payment Fees and/or Dishonour Fees).
Total Interest Percentage is the Interest Expense expressed as a percentage of the Loan Amount (and may also be referred to as a ‘flat rate’ or ‘flat interest rate’).
Total Repayment Amount is the total amount that is to be paid to the lender, comprising the Loan Amount and the Total Cost of Credit.