Frequently asked questions about general insurance and the Financial Claims Scheme
This page contains frequently asked questions relating to the Financial Claims Scheme (FCS) for general insurers. A list of all general insurers covered under the FCS is available here.
Does the FCS cover all insurance policies?
The FCS only covers policies issued by general insurance companies. 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 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.
How are the amounts payable for each claim determined?
In the unlikely event that a general insurer fails and the Australian Government activates the FCS, 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.
If the insurance claim is valid and $5,000 or over, APRA will also need to determine whether the policyholder or claimant is eligible based on the following criteria:
- individuals who are Australian citizens or permanent residents
- non-resident individuals who have insured against risks located in Australia
- Australian-based small businesses, as defined under the Income Tax Assessment Act 1997
- Australian-based not-for-profit organisations
- trustees of Australian-based family trusts.
APRA will then determine through a claims assessment process the validity of each claim and the amount payable to eligible policyholders and claimants. In most cases, the amount paid 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 amount claimed is justified.
If a policyholder or claimant is not eligible under the FCS, they can apply to the liquidator along with other unsecured creditors in the liquidation of the general insurer.
What happens with unexpired premiums?
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 winding up 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 winding up of the insurer, but not through the FCS.
How are alternative insurance cover arrangements covered under the FCS?
It is recognised that policyholders whose policies are in force at the time the FCS is activated will need some time to find alternative insurance cover. The FCS will continue to cover policyholders, and certain other claimants, for valid claims for 28 days following the activation of the FCS for a general insurer. Within this time, policyholders will be expected to set up alternative insurance cover.
If you are unable to find the information you are looking for on this page, please contact APRA.