NIBA Advocates for a Targeted and Fair CSLR in Post-Implementation Review

NIBA has made a strong case for maintaining the targeted scope of the Compensation Scheme of Last Resort (CSLR) in its recent submission to Treasury’s post-implementation review.  

Representing the insurance broking profession, NIBA has reiterated its commitment to robust consumer protections while cautioning against unnecessary regulatory and financial burdens on firms that do not contribute to unpaid determinations. 

The CSLR was introduced to provide compensation to consumers where financial service providers fail to meet their obligations, with an emphasis on areas of demonstrated risk. In its submission, NIBA emphasised that general insurance intermediaries are appropriately excluded from the scheme. It noted that there is no evidence suggesting that insurance brokers contribute to unpaid determinations in a manner that would justify their inclusion. Expanding the scheme’s scope to capture insurance intermediaries would impose unnecessary costs on both businesses and consumers without enhancing consumer protection. 

NIBA also made a number of recommendations aimed at improving the long-term economic viability of the scheme, including enforcing the scheme’s right to subrogation and professional indemnity insurance requirements. 

Under the CSLR, claimants subrogate their rights to the scheme, allowing it to seek recovery from firms that have failed to meet their compensation obligations. However, there is currently limited transparency on whether the CSLR has pursued recovery actions. NIBA has urged greater enforcement in this area to ensure that financial firms responsible for unpaid determinations bear the costs rather than compliant businesses. 

NIBA’s submission also highlighted the importance of enforcing professional indemnity (PI) insurance requirements. Australian Financial Services licensees are required to hold PI insurance that covers compensation payments resulting from Australian Financial Complaints Authority (AFCA) determinations. However, compliance issues persist, leading to gaps in coverage. NIBA has called for ASIC to take a more proactive role in ensuring firms meet their PI insurance obligations, strengthening consumer protections while reducing the financial burden on responsible firms. 

In its submission, NIBA reaffirmed its support for the CSLR’s core objective of protecting consumers but urged Treasury to ensure that any future changes to the scheme remain proportionate and evidence based. Calling for policy settings that uphold the integrity of the financial services sector while avoiding unnecessary costs that could undermine the accessibility and affordability of professional risk advice.