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Life Insurance (Conduct and Disclosure) Bill 1998

Part 3 Conduct of life companies and their life insurance advisers

   

25   Effect of Part

                   This Part contains provisions governing the conduct of life companies and their life insurance advisers in relation to the giving of certain insurance services, including in particular the giving of life insurance advice.

26   Definitions

                   In this Part:

exempt person means a person included in a class of persons declared by the regulations to be exempt from this Part.

life insurance adviser , in relation to a life company, means:

                     (a)  a natural person (other than an exempt person or a life broker referred to in paragraph (b)) who is an agent or a sub-agent of the life company, whether or not the person is authorised to give life insurance advice by or under the terms of his or her agency agreement; or

                     (b)  a natural person (other than an exempt person) who is a life broker, but who does anything to which this Part applies in the course of acting as an agent or a sub-agent of the life company, whether or not the person is authorised to give life insurance advice by or under the terms of his or her agency agreement; or

                     (c)  a natural person (other than an exempt person) who is an employee of the life company, whether or not the person is authorised to give life insurance advice by or under the terms of his or her employment; or

                     (d)  any other natural person (other than an exempt person) who is authorised to give life insurance advice by the life company, or by or under the terms of his or her employment by an agent or sub-agent of the life company, or who gives such advice while ostensibly acting within the scope of such an authorisation.

27   Disclosure statements

             (1)  A life insurance adviser of a life company who offers, or is asked to give, a person (the client ) an insurance service in relation to a life policy or life policies issued by the life company must, as soon as practicable after the adviser’s first contact with the client, give or send to the client a written disclosure statement containing the prescribed particulars.

             (2)  Subsection (1) does not apply in relation to a client who has previously received a disclosure statement from the adviser, unless the particulars set out in that disclosure statement are no longer accurate or complete.

             (3)  A person is guilty of an offence if:

                     (a)  the person fails to do an act; and

                     (b)  failing to do the act results in a contravention of subsection (1).

Penalty:  200 penalty units.

Note:          Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

             (4)  In this section:

insurance service , in relation to a life policy or life policies, means any service or advice about, or connected with, the policy or policies (including life insurance advice within the meaning of this Act), but does not include any service or advice of a kind declared by the regulations to be a service or advice to which this section does not apply.

28   Life insurance advice must contain certain information

             (1)  A life insurance adviser of a life company who gives life insurance advice to a person who may reasonably be expected to rely on it must ensure that the advice meets the requirements of this section.

             (2)  An advice must be in writing.

             (3)  The document containing the advice must also set out:

                     (a)  the name and business address of the life insurance adviser; and

                     (b)  such other particulars as are prescribed; and

                     (c)  the basis on which the advice is given.

             (4)  The document containing the advice must also set out details of:

                     (a)  any benefit or advantage, whether pecuniary or not and whether direct or indirect, that the adviser or an associate of the adviser has received, or will or may receive, in connection with the giving of the advice or the issue of a life policy to the person to whom the advice is given; and

                     (b)  any other pecuniary or other interests, whether direct or indirect, of the adviser or an associate of the adviser that may reasonably be expected to be capable of influencing the adviser in giving the advice.

             (5)  Subsection (3) does not apply to life insurance advice in respect of a life policy, or a kind of life policy, prescribed for the purposes of this subsection.

             (6)  Subsection (4) does not apply:

                     (a)  in relation to any fees or commissions that the life insurance adviser has received directly, or will or may receive directly, from the person to whom the advice is given; or

                     (b)  to life insurance advice in respect of a life policy, or a kind of life policy, prescribed for the purposes of this paragraph.

             (7)  The material that must be included in a document under subsection (3) or (4) must be in writing that is not less legible than the other material in the document.

29   Life insurance advice must have a reasonable basis

             (1)  A life insurance adviser of a life company who gives life insurance advice to a person who may reasonably be expected to rely on it must have a reasonable basis for giving the advice to the person.

             (2)  For the purposes of subsection (1), a life insurance adviser does not have a reasonable basis for giving life insurance advice to a person unless:

                     (a)  having regard to the person’s objectives, financial situation and particular needs, the adviser has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all the circumstances; and

                     (b)  the advice is based on that consideration and investigation.

             (3)  Subsection (1) does not apply to life insurance advice in respect of a prescribed life policy, or kind of life policy.

30   Life company must not issue or vary life policies in certain cases

             (1)  A life company is guilty of an offence if:

                     (a)  the life company issues a life policy to, or varies a life policy at the request of, a person (the client ); and

                     (b)  the client has received life insurance advice in respect of the life policy from a life insurance adviser of the company; and

                     (c)  the advice does not meet the requirements of section 28, or the person who gave the advice contravened section 29 in giving the advice; and

                     (d)  the client has not indicated in writing to the company that he or she does not rely on the advice in entering into, or varying, the policy, as the case may be.

Penalty:  200 penalty units.

Note:          Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

             (2)  In this section, a reference to life insurance advice in respect of a life policy includes life insurance advice in respect of a class of life policies that includes that policy.

31   Life company’s civil liability if section 28 or 29 is contravened

             (1)  Subject to this section, if:

                     (a)  a life insurance adviser of a life company contravenes section 28 or 29 in relation to life insurance advice given to a person by the adviser; and

                     (b)  the person engages in a life insurance activity relating to a life policy issued by the company in reliance on the advice; and

                     (c)  it is reasonable, having regard to the advice and all other relevant circumstances, for the person to have relied on the advice; and

                     (d)  the person suffers loss or damage as a result of so acting in reliance on the advice;

the person may recover the amount of the loss or damage by action against the company in a court of competent jurisdiction.

             (2)  It is a defence to an action based on an alleged failure to comply with subsection 28(4) if the life company proves that the life insurance adviser who made the relevant recommendation was not, and cannot reasonably be expected to have been, aware of the benefit, advantage or interest not disclosed in the advice.

             (3)  It is a defence to an action based on an alleged failure to comply with section 28 if the life company proves that a reasonable person in the same circumstances as the person to whom the advice was given could be expected to have acted in reliance on the advice even if the adviser had complied with that section in relation to the advice.

             (4)  In addition to other relief granted in an action under subsection (1), the court, if it thinks it necessary in order to do justice between the parties:

                     (a)  may make an order declaring a life policy (other than a group policy) to be void; and

                     (b)  if it makes an order under paragraph (a), may make a further order directing the life company to repay to the plaintiff money paid to the company in connection with the policy, including an amount of interest on that money specified in, or calculated in accordance with, the order.

32   False or misleading statements etc.: civil liability

             (1)  If:

                     (a)  a person engages in a life insurance activity relating to a life policy issued by a life company; and

                     (b)  the person does so in reliance on a statement made by, or information provided by, a life insurance adviser of the company in or in connection with giving the person life insurance advice; and

                     (c)  the statement or information is false or misleading in a material particular, or there is a material omission from the statement or information; and

                     (d)  the person suffers loss or damage as a result of so acting in reliance on the statement or information;

the person may recover the amount of the loss or damage by action against the life company in a court of competent jurisdiction.

             (2)  In addition to other relief granted in an action under subsection (1), the court, if it thinks necessary in order to do justice between the parties:

                     (a)  may make an order declaring a life policy (other than a group policy) to be void; and

                     (b)  if it makes an order under paragraph (a), may make a further order directing the life company to repay to the plaintiff money paid to the company in connection with the policy, including an amount of interest on that money specified in, or calculated in accordance with, the order.

33   False or misleading statements etc.: criminal liability

             (1)  If:

                     (a)  a life insurance adviser of a life company makes a statement, or provides a person with information, in or in connection with giving the person life insurance advice; and

                     (b)  the statement or information is likely to induce the person to engage in a life insurance activity; and

                     (c)  the adviser does so knowing that the statement or information is false or misleading in a material particular, or there is a material omission from the statement or information;

the adviser is guilty of an offence punishable on conviction by imprisonment for not more than 12 months.

Note 1:       Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

Note 2:       Subsection 4B(2) of the Crimes Act 1914 allows a court that convicts an individual of an offence to impose a fine instead of, or in addition to, a term of imprisonment. The maximum fine that a court can impose on the individual is worked out by multiplying the maximum term of imprisonment (in months) by 5, and then multiplying the resulting number by the amount of a penalty unit. The amount of a penalty unit is stated in section 4AA of that Act.

             (2)  If:

                     (a)  a life insurance adviser of a life company makes a statement, or provides a person with information, in or in connection with giving the person life insurance advice; and

                     (b)  the statement or information is likely to induce the person to engage in a life insurance activity; and

                     (c)  the adviser does so reckless as to whether the statement is false or misleading in a material particular, or there is a material omission from the statement or information

the adviser is guilty of an offence punishable on conviction by imprisonment for not more than 6 months.

Note 1:       Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

Note 2:       Subsection 4B(2) of the Crimes Act 1914 allows a court that convicts an individual of an offence to impose a fine instead of, or in addition to, a term of imprisonment. The maximum fine that a court can impose on the individual is worked out by multiplying the maximum term of imprisonment (in months) by 5, and then multiplying the resulting number by the amount of a penalty unit. The amount of a penalty unit is stated in section 4AA of that Act.