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Not for Profit Insurance

In Australia, we have extensive regulation to make sure that insurance companies that conduct business here are financially strong and are able to pay claims when called upon to do so. In fact, these insurance companies have to hold a licence under the Insurance Act 1973 to be able to conduct business in Australia.

Regulation and the monitoring of insurance companies has been considerably strengthened by the Australian Prudential Regulation Authority (APRA) since the collapse of the HIH Group of companies in March 2001.

Our laws do not, however, prevent insurance companies who conduct business outside Australia from offering insurance products to Australian companies, organisations or individuals, usually through a local insurance broker or agent. These foreign insurance companies are not subject to the Australian prudential regulation and are known as 'Unauthorised Foreign Insurers'.

Regulation similar to that in Australia operates within many of the world's developed countries and you can be reasonably confident that if you are dealing with insurance companies domiciled in these countries that they will have the financial strength and ability to pay claims as they fall due. But there are other countries where there is little or no prudential regulation. Insurance companies may set up business in such countries because they do not have sufficient financial strength and want to avoid prudential regulation.

Insurance products offered by some 'Unauthorised Foreign Insurers' domiciled in low regulation countries often appear attractive because they may be very cheaply priced compared to a similar insurance policy offered by a licensed Australian insurance company. But you should be very careful when considering whether to buy an insurance product from one of these foreign companies because you may find that the insurance policy you have purchased offers little value or protection for the following reasons:

• The insurance company gets into financial difficulty and does not pay your claim(s).
• The insurance policy is written in a way that the insurance company can avoid paying claims that would normally be paid by an Australian insurance company.
• The insurance company simply avoids paying your claims because it does not have a reputation or presence to protect in Australia.
• The insurance policy provided is subject to the laws and jurisdiction of the country in which the insurance company is domiciled and little protection for you as a consumer may exist.
• You may find it difficult to lodge a claim with the insurance company simply because it is domiciled in a country a long way from Australia.

It is usually difficult to spot the difference between an acceptable Foreign Insurer and one who is not, without some knowledge and experience of the global insurance markets. Whilst Aon cannot obviously guarantee insurance companies' performance, our global knowledge, experience and resources can provide you with a level of comfort that you are dealing with a credible insurance company.

Please call us on 1300 309 797 if you have concerns that you are dealing with an 'Unauthorised Foreign Insurer' or want more information on this subject.