Frequently asked questions about general insurance and the Financial Claims Scheme

In the unlikely event that a general insurer fails and the FCS is activated by the Australian Government, APRA and the insurer will seek to communicate directly with eligible policyholders on any steps they need to take to access their FCS payment.

The FCS only covers policies issued by general insurance companies authorised by APRA. 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).

In addition, there are some general insurance products that are specifically excluded from the FCS. These include:

• policies that are required to be held under State or Territory law and are protected separately by arrangements administered by the State or Territory
• certain policies that relate to liabilities that arose before 1 July 2002;
• reinsurance and retrocession arrangements; and
• a policy that indemnifies (insures) another insurance policy.

If you are unsure whether your insurance policy is covered under the FCS, you should contact your general insurer.

APRA will, in most cases, pay policyholders and certain other claimants the amount they would have been able to claim from the failed insurer for a valid insurance claim that is under $5,000. 

For claims of $5,000 or over, APRA will need to collect further information to determine the eligibility of claimants prior to claims assessment. Eligible claimants include:

• individuals who are Australian citizens or permanent residents
• non-resident individuals who have insured against risks located in Australia
• Australian-based small businesses
• Australian-based not-for-profit organisations
• trustees of Australian-based family trusts.

Once eligibility is confirmed, APRA will determine the validity of each claim and the amount payable through a claims assessment process. If a policyholder or claimant is not eligible under the FCS, they may still be able to lodge a claim with the liquidator, along with other unsecured creditors, in the liquidation of the general insurer.

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.

However, in some circumstances, APRA may transfer eligible policyholders’ claims to a third party (for example, another general insurer) who will become responsible for transferred claims, including payment to policyholders on valid claims.

The period for making a claim under the FCS ends 12 months from the time the FCS is declared (unless specified otherwise by APRA at the time). Therefore, in order to be eligible for payment under the FCS, eligible claims must either:

• have been made either before the FCS was declared; 
• or be made within 12 months of the FCS declaration (APRA may in some circumstances extend the period for lodgement, and will seek to inform potential claimants should this occur). 

The time it takes to process and pay claims will depend on the type of policy, and whether all information for claims assessment, including determining eligibility, is available. Generally, once the claims process and determination of payments has been authorised by APRA, funds will be paid to eligible claimants. 

Policyholders can receive payment under the FCS for multiple claims arising under eligible policies. Once APRA verifies eligibility of the policyholder or claimant, each claim will be assessed to determine the eligibility of each policy and the validity and value of each claim.

The FCS will 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.

The FCS does not apply to any unexpired insurance premiums paid to the general insurer before its failure. Policyholders may be entitled to claim some or all of their unexpired premiums in the liquidation of the insurer. For example, if an insurer failed part way through a year in which you had already paid your premium, you may be able to claim for the unexpired portion of the premium in the liquidation of the insurer, but not through the FCS.

A small business or non-profit body based in Australia is eligible to receive payment under the FCS. Once APRA verifies eligibility of the claimant, the claim will go through the claims assessment process to determine whether the claim is valid.

Further information may need to be obtained to verify a claimant’s status as a small business or non-profit body, and there are specific statutory requirements for eligibility.  For example, for the purposes of the FCS, a “small business” has the same meaning as the definition given in the Income Tax Assessment Act 1997.