Commonwealth Numbered Regulations - Explanatory Statements

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LIFE INSURANCE REGULATIONS (AMENDMENT) 1996 NO. 89

STATUTORY RULES 1996 No. 89

Issued by the Authority of the Assistant Treasure

Life Insurance Act 1995

Life Insurance Regulations (Amendment)

Section 253 of the Life Insurance Act 1995 (the Act) provides that the Governor-General may make regulations for the purposes of the Act.

The Act provides for the prudent management of life companies and for their supervision by the Insurance and Superannuation Commissioner.

Three rounds of regulations have been released progressively since the commencement of the Act on 1 July 1995. The amendment comprises the fourth round of regulations.

The Life Insurance Act 1945 referred to the concept of 'industrial insurance business', which was defined to mean life insurance business that consisted of the issuing of industrial policies or the undertaking of liability under industrial policies. The 1945 Act defined 'industrial policy' to mean a policy by which the premiums were contracted to be collected by a collector at least once every two months. The 1945 Act provided provisions for the non-forfeiture of policies in certain cases on non-payment of premiums, but those provisions were different for ordinary policies (section 100) and industrial policies (section 101).

Companies stopped writing the class of industrial insurance business some 20 years ago. Subsequently the then Life Insurance Commissioner deemed all existing industrial policies to be ordinary policies, and effectively subsumed all industrial policies within the class of ordinary business. From that time companies incorporated industrial policy statistical returns with ordinary policy statistical returns. The review of the 1945 Act proposed that the definitions of and references to 'industrial insurance business' and 'industrial policies' be excluded from the Act to validate the change in status of these policies. The 1995 Act only provides for two classes of life insurance business - ordinary business and superannuation business.

Despite these events, there still exists a large number of industrial policies on the records of the larger, older life companies. These will remain on the companies' books until the policy owner either surrenders the policy, or the benefit is paid out in its entirety.

As the Act makes no reference to these policies, the general non-forfeiture provisions under section 210 of the Act which replace the non-forfeiture provisions of ordinary policies under section 100 of the 1945 Act are assumed to apply to this class. This was an unintended consequence of not reinstating this class in the Act.

Subsection 206(3) of the Act provides that policy non-forfeiture provisions may be modified in relation to a particular class of life policy. The regulation provides that, for as long as companies maintain these pre-existing industrial policies on their records, the non-forfeiture provisions should be those as described in section 10 1 of the 1945 Act, instead of section 2 10 of the Act.

The Regulation has been developed in consultation with representatives of the life insurance industry.

The commencement date of the Regulation is the date of gazettal.