ASIC Insurance Enforcement in Australia

The Australian Securities and Investments Commission (ASIC) is Australia's corporate, markets, and financial services regulator. Its remit includes supervising the conduct of Australian Financial Services (AFS) licence holders — which encompasses every general insurer operating in Australia, including home, contents, and strata insurers.

ASIC's primary tools in the insurance context are the Australian Securities and Investments Commission Act 2001 (ASIC Act), which prohibits misleading, deceptive or unconscionable conduct in financial services, and the Corporations Act 2001, under which insurance products and advice are regulated. ASIC does not typically intervene in individual claims disputes — that is AFCA's role — but ASIC's enforcement activity shapes the standards insurers must meet across their entire claims handling and customer service operations.

• Product disclosure: Insurers must ensure their Product Disclosure Statements (PDS) are accurate, clear, and not misleading. ASIC has taken action against insurers whose PDS documents misrepresented the scope of cover.
• Handling of vulnerable customers: ASIC guidance and the General Insurance Code of Practice require insurers to identify and appropriately support customers in vulnerable circumstances — including those affected by natural disasters.
• Systemic conduct issues: Where ASIC identifies patterns of poor conduct across an insurer's operations — for example, systematic underpayment or unreasonable declines — it may investigate and take enforcement action even without an individual complaint.

One of the most significant changes to insurance regulation in Australia's recent history came from the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Royal Commission found that insurance claims handling had historically been exempt from the “financial service” definition, meaning insurers could not be directly held to the conduct obligations in the Corporations Act when handling claims.

The Financial Sector Reform (Hayne Royal Commission Response) Act 2021 closed that gap. From 1 January 2022, insurance claims handling and settling became a financial service under the Corporations Act 2001. This means:

• AFS licence obligations apply: Insurers must handle claims efficiently, honestly, and fairly — and ASIC can take enforcement action if they do not. Previously, these obligations existed under industry codes but not directly under statute.
• Best interests obligations for advice: Where insurers (or their representatives) provide advice in the context of a claim, they must comply with the relevant conduct and disclosure obligations under the Corporations Act.
• ASIC has supervisory power over claims handling: ASIC can now review, investigate, and take action against insurers for systemic claims handling failures as a matter of regulatory enforcement — not merely as industry oversight.
• Insurance Contracts Act 1984 still applies: The pre-existing statutory framework under the Insurance Contracts Act 1984 — including the duty of utmost good faith — continues to govern the relationship between insurer and policyholder. The 2021 reform adds a further layer of ASIC-enforceable conduct obligations.

ASIC enforcement activity does not typically deliver direct compensation to individual policyholders — that is the role of AFCA and the courts. But ASIC enforcement sends clear signals about the standards insurers are expected to meet, and published enforcement actions give policyholders a factual basis for their own complaints.

• Published standards for claims handling: ASIC's regulatory guides and published reports — including its work following the Royal Commission — set out the standards ASIC expects of insurers in handling claims. These include acting in good faith, making decisions promptly, communicating clearly, and not using policyholder information asymmetry to disadvantage claimants.
• Deterrent effect on systemic misconduct: ASIC enforcement creates a deterrent against practices such as systematically delaying claims to reduce payouts, using misleading policy language to deny legitimate claims, or failing to train claims handlers appropriately.
• Referrals from AFCA: AFCA can refer matters to ASIC where it identifies systemic issues or conduct that warrants regulatory attention beyond the resolution of individual complaints. This creates a feedback loop between consumer complaints and regulatory oversight.
• ASIC reports as evidence: ASIC publishes reports on insurance industry conduct. Where those reports document patterns of poor handling in specific claim types or by specific insurers, policyholders can reference those findings to support their own IDR or AFCA complaints.

Understanding the framework of obligations your insurer operates under helps you identify when a breach has occurred and what remedies are available.

• Duty of utmost good faith: Under the Insurance Contracts Act 1984, both the insurer and the insured owe each other a duty of utmost good faith. For insurers, this means acting honestly and not taking advantage of the policyholder's relatively weaker position. A breach of this duty can entitle the policyholder to pursue remedies including declining to be bound by an exclusion.
• Efficient, honest and fair claims handling: Under the Corporations Act (as amended by the 2021 reform), insurers must handle and settle claims in an efficient, honest, and fair manner. A failure to do so is a breach of their AFS licence obligations, enforceable by ASIC.
• General Insurance Code of Practice: The Code, administered by the Insurance Council of Australia, sets detailed standards for claims communication, timeframes, and the treatment of customers in financial hardship or vulnerable circumstances. Code breaches can be raised in IDR, AFCA, and referred to ASIC.
• AFCA as the primary remedy pathway: For individual claim disputes, AFCA is the most accessible, fastest, and lowest-cost pathway. AFCA's determinations are binding on insurers and can cover the full range of losses arising from insurer misconduct.

You can lodge a report about an insurer with ASIC at asic.gov.au. For individual dispute resolution, lodge with AFCA at afca.org.au.

While ASIC sets and enforces the regulatory framework, it is AFCA that handles individual insurance disputes. Understanding how the two bodies interact helps you pursue your rights at the appropriate level.

• Use AFCA for your claim dispute: If your insurer has declined, underpaid, or unreasonably delayed your claim, lodge with AFCA after completing the insurer's Internal Dispute Resolution process. AFCA is free, and its determinations are binding on the insurer.
• Report conduct to ASIC separately: If you believe your insurer's conduct constitutes systemic misconduct — not just a one-off poor outcome — you can report this to ASIC. ASIC does not resolve individual disputes but may investigate patterns of conduct.
• Reference ASIC standards in your AFCA complaint: When framing your AFCA complaint, you can refer to the statutory obligations under the Corporations Act and the Insurance Contracts Act 1984, as well as relevant ASIC regulatory guidance. AFCA applies the law when making its determinations.
• Legal advice for complex matters: For claims involving very large losses or particularly complex legal questions, consider obtaining independent legal advice from a lawyer experienced in insurance law. Community legal centres and consumer advocacy organisations can also assist.

Thorough documentation of your property damage — including professional assessments and independent scopes of works — gives any complaint pathway the factual foundation it needs to succeed.