The Australian Prudential Regulation Authority (APRA) has released an updated set of frequently asked questions (FAQs) on the safety net it has created for the holders of general insurance policies.
In a statement, APRA said the Financial Claims Scheme (FCS) was established during the 2008 global financial crisis to provide financial protection for consumers in the unlikely event of a failure of a bank, credit union, building society or general insurer.
“The Financial Claims Scheme can only be activated by the Australian Government, and this will only be done in the unlikely event that a bank, building society or credit union has failed and can no longer meet its financial obligations,” APRA said.
“The FCS is a government-backed safety net for deposits of up to $250,000 per account holder per ADI [authorised deposit-taking institutions],” it said.
“It also covers most general insurance policies for claims up to $5,000, with claims above $5,000 eligible if they fulfil certain criteria.”
APRA said that in the event that a general insurer failed and the FCS was activated by the Government, APRA and the insurer would seek to communicate directly with eligible policyholders on any steps they needed to take to access their FCS payment.
The Authority said the FCS only covered policies issued by general insurance companies it authorised.
“It does not cover life insurance policies or private health insurance policies (although private health insurance policyholders may be protected under the Private Health Insurance (Collapsed Insurer Levy) Act 2003),” it said.
“In most cases, the amount paid by APRA will be the full amount that the policyholder or claimant would have been entitled to under the insurance policy, assuming the claim is valid and the policyholder is eligible for payment under the FCS.”
APRA said policyholders could receive payment under the FCS for multiple claims arising under eligible policies.
It said the FCS would continue to cover existing eligible policyholders, and certain other claimants, for valid claims for 28 days following the activation of the FCS for a general insurer.
“Within this time, it is up to policyholders to seek out alternative insurance cover if desired.
APRA advised people who were unsure about whether their insurance policy was covered under the FCS to contact their general insurer.
APRA’s FCS FAQs can be accessed at this PS News link.
