ASIC Corporations (Cash Settlement Fact Sheet) Instrument 2022/59

The instrument uses several key terms defined by reference to the Corporations Act 2001. A “providing entity” has the same meaning as in section 948B of the Act: broadly, a person who provides a financial service to a retail client in relation to a general insurance product. A “Cash Settlement Fact Sheet” is a disclosure document required under Division 3 of Part 7.7 of the Act, containing information about the settlement offer, the basis on which it is made, and the client’s rights. The instrument does not amend the content requirements of the fact sheet; it only changes when it must be given.

A “cash settlement offer” is an offer by the providing entity to settle all or part of a claim under a general insurance product using a cash payment. The instrument does not define “general insurance product” but it takes the definition from the Act: insurance contracts that are not life insurance, including motor vehicle, home, travel, and sickness and accident insurance, among others. The offer must be “verbal” - that is, made orally, not in writing. The requirement that the client has “expressly instructed” that they are in “immediate need” of a cash payment because of the insurable event is a factual test: the client must say so, and the providing entity must record that instruction. The instrument does not prescribe a form for that instruction, so it may be given in person or over the phone.

The 42-day limit runs from the “insurable event the subject of the claim”. This is the event that gives rise to the claim (e.g. the storm that damaged the roof), not the date the claim was notified. This may be earlier than the claim lodgement date, shortening the window for insurers to rely on the exemption. The $5,000 cap is an aggregate limit: it includes the current offer plus any other qualifying cash settlement offers made by the same providing entity on the same claim that have been accepted or remain capable of acceptance. If the total exceeds $5,000, the exemption does not apply to any of those offers, even if the individual offer is under $5,000. The instrument does not state whether the cap applies to the insurer’s internal group or just the legal entity; on its face “the providing entity” is the entity making the offer, so intra-group aggregation is not required.

The instrument also introduces the concept of a “right of reversal”: a right for the client to undo the accepted settlement. The providing entity must offer this right on terms that include a 12-month exercise period from the date the cash payment was made, and no interest or fees on the amount of the cash payment. The note to paragraph (5)(d) clarifies that the right of reversal does not limit any other rights of review the client may have under the insurance product, such as internal dispute resolution or access to the Australian Financial Complaints Authority.

The primary duty bearers are providing entities - insurers, agents, and other persons who provide financial services in relation to general insurance products to retail clients. That includes licensed insurers, authorised representatives, and claims managers acting on their behalf. The instrument directly affects claims handling departments, compliance officers, and the systems they use to manage small cash settlements. For the exemption to apply, claims staff must be trained to identify qualifying offers: those where the client has expressed immediate need, where the total is under $5,000, and where the verbal offer is made within 42 days of the insurable event. The requirement to give the Cash Settlement Fact Sheet within 48 hours (electronic) or 5 business days (paper) imposes a timeline that may be tighter than standard claims processes, particularly if a written fact sheet requires managerial approval or legal review.

Clients (policyholders) are the intended beneficiaries. The exemption is designed to speed up cash payments for small, urgent claims - for example, a burst pipe that floods a kitchen, where the client needs money immediately for emergency repairs or temporary accommodation. However, the instrument also adds protections: the client gets a right of reversal for 12 months, which is longer than the typical cooling-off period for insurance products. This may benefit clients who later discover the settlement was inadequate, but it also creates uncertainty for the providing entity because the settlement can be undone up to a year after payment.

The instrument also affects regulators, particularly ASIC, which must monitor compliance with the conditions. If a providing entity fails to meet any condition (e.g., does not take all reasonable steps to give the fact sheet on time), the exemption is lost and the entity must comply with the original timing requirement or face penalties. The self-repeal date of 1 April 2030 means the exemption is temporary; entities that rely on it may need to adjust their systems again if the instrument is not remade.

Lawyers and financial advisers advising clients on small insurance claims should be aware of this instrument. The right of reversal may be relevant in disputes about settlement adequacy. Conversely, if a client accepts a verbal settlement and later seeks to reverse it, the lawyer must ensure the client does so within the 12-month window and without any attempt by the insurer to charge interest or fees (which is prohibited by the instrument).

The instrument imposes four key duties on the providing entity when relying on the exemption. First, at the time the verbal cash settlement offer is made, the entity must verbally give the client the information and statements specified in subsection 948F(1) of the Act. That subsection generally requires disclosure of key facts about the settlement offer, including the amount, the basis for calculation, and the client’s right to seek further information or external review. The verbal provision must occur contemporaneously with the offer - it cannot be given later by letter or email.

Second, the entity must take all reasonable steps to give the client a Cash Settlement Fact Sheet within 48 hours of the verbal offer if it is given electronically, or within 5 business days if the client has notified the entity that they cannot or do not want to receive it electronically. “All reasonable steps” is a standard of effort, not an absolute guarantee. If the fact sheet is lost in the post or the client’s email is incorrect, the entity may still be deemed to have complied if it took reasonable steps. However, the burden is on the entity to prove it took those steps.

Third, the entity must take all reasonable steps to make the cash payment within 2 days of the client’s acceptance of the verbal offer. This is a tight timeline - payment by electronic transfer or direct deposit within two business days may be feasible, but if the client requests a cheque or other slower method, the entity may find it difficult. The instrument does not allow the entity to set a longer payment timeframe, and any delay risks losing the exemption.

Fourth, the entity must provide the client with a right of reversal. The terms must include: (a) the client may exercise the right up to 12 months after the date the cash payment was made; and (b) no interest or fees on the amount of the cash payment are payable by the client. The note clarifies that other rights of review under the insurance product are not limited. The entity may impose other conditions on the right of reversal (e.g., that the client return the cash payment) provided they do not conflict with the mandatory terms. The instrument does not specify the form of the right - it could be included in the verbal information, but as a practical matter, written terms are advisable.

The client’s right to reverse is a powerful protection. It means the client can treat the settlement as provisional for up to a year. If the client later finds the settlement insufficient, they can cancel it and resume their claim. This may incentivise insurers to make fair offers initially, but it also creates a financial exposure: the insurer may have paid out $5,000 but then be forced to repay a larger claim if the settlement is reversed and the claim is re-litigated.

The instrument itself does not create any penalties. It is an exemption from a provision of the Corporations Act. If a providing entity fails to satisfy all the conditions of the exemption (including the conditions set out in subsection (3)), then the exemption does not apply. In that case, the entity must comply with the original timing requirement in subsection 948C(1) of the Act - that is, give the Cash Settlement Fact Sheet at the time specified in section 948D. Failure to do so would mean the entity has contravened the Act.

The consequences of a contravention of section 948C are set out in the Act. Broadly, a failure to give a required disclosure document to a retail client is a breach of a civil penalty provision, and ASIC may seek orders for a pecuniary penalty (up to the maximum for a body corporate under the Act) or an infringement notice. Individual officers may also be liable under the accessorial liability provisions. Additionally, a court may make orders for compensation, or the client may have a right to rescind the contract under section 955 of the Act.

Enforcement is at ASIC’s discretion. The instrument does not require ASIC to monitor compliance proactively; it is complaint-driven. ASIC may also include the conditions of the instrument in its surveillance activities, such as reviewing claims handling practices of general insurers. The instrument’s self-repeal date of 1 April 2030 suggests ASIC may review the exemption before then to decide whether it should be extended, modified, or allowed to lapse.

It is also worth noting that the right of reversal is a contractual right created by the instrument, not a statutory right under the Act. If the providing entity fails to honour the right of reversal (e.g., by refusing to accept a reversal within the 12-month period), the client’s recourse would be for breach of contract, not for a breach of the Corporations Act. ASIC may still take action if the failure to honour the right indicates a systemic compliance issue, but the primary remedy is private action.

The instrument is made under paragraph 951B(1)(a) of the Corporations Act 2001, which permits ASIC to exempt a person or class of persons from a provision of Part 7.7 (financial product disclosure). It operates as a legislative instrument under the Legislation Act 2003. It is subordinate to the Corporations Act and cannot override its fundamental requirements; it only modifies the timing of a specific disclosure obligation.

The instrument sits alongside the broader disclosure regime for general insurance products under Part 7.7. Even when the exemption is used, the providing entity remains subject to other disclosure obligations, including the requirement to give a Product Disclosure Statement (if applicable) and to comply with the general prohibition against misleading or deceptive conduct in section 1041H of the Act and section 12DA of the ASIC Act 2001. The right of reversal does not replace any right the client may have under the Insurance Contracts Act 1984 to avoid a contract for non-disclosure or misrepresentation (subject to the duty of utmost good faith). Nor does it affect the operation of the unfair contract terms provisions in the ASIC Act or the Australian Consumer Law.

The instrument also intersects with the claims handling standards set by ASIC in Regulatory Guide 271 (Internal Dispute Resolution) and the Australian Financial Complaints Authority (AFCA) rules. The verbal information required under section 948F(1) may overlap with the information an insurer must give under the General Insurance Code of Practice (if subscribed). Insurers that are code subscribers must consider whether the extra conditions (e.g., the reversal right) align with or exceed their code obligations.

The self-repeal provision (section 6) means the instrument will cease to have effect on 1 April 2030. If the exemption is still needed, ASIC must remake the instrument before that date. During the period of operation, the instrument is subject to disallowance by either House of Parliament. The amendment history shows a change to section 5(2)(b) made by the same instrument number (2022/59) - likely a correction to the original text - and a later amendment in 2024 that adjusted the repeal date to 1 April 2030. This suggests the original repeal date was earlier and has been extended.

The instrument was originally made on 8 February 2022 and registered as F2022L00124. It commenced on 9 February 2022. A compilation was later issued incorporating an amendment made by ASIC Corporations (Amendment) 2024/883, registered on 21 November 2024 and commenced on 22 November 2024. The compilation date is 22 November 2024.

The amendment history in endnote 4 shows two changes. Section 2 (which was likely the provision specifying the legislative instrument number or similar) was repealed by operation of section 48D of the Legislation Act 2003 - a standard provision that removes redundant clauses once the instrument is registered. Section 5(2)(b) was amended by the same instrument (2022/59) - this appears to be a self-correction, possibly to fix an error in the original text. The exact nature of the amendment is not stated, but the compiled text shows section 5(2)(b) now reads “(b) the cash settlement offer has been made verbally (verbal cash settlement offer) to the client no later than 42 days after the insurable event the subject of the claim;”. It is plausible the original version may have had different timeframe or missing words.

Section 6 (the repeal provision) was amended by the same instrument (2022/59) - again a self-correction. The compiled text states “This instrument is repealed at the start of 1 April 2030.” The original version likely had a different date (perhaps 1 April 2027 or earlier). The 2024 amendment (F2024L01468) may have further adjusted the repeal date, though the amendment history only shows “am 2022/59” for s 6. It is possible the endnote is incomplete, but on the face of it, the repeal date has been set to 1 April 2030. Any extension or further amendment will require a new legislative instrument.

The instrument has had two versions: original (2022) and amended (2024). There are no uncommenced amendments. The instrument is not subject to any modification by other laws. The endnotes indicate that misdescribed amendments are not applicable.

The instrument does not reference any court cases, and as of the compilation date there are no known reported decisions that turn on its interpretation. This is unsurprising for several reasons. First, the instrument is narrow and recent; it has been in force only since February 2022, with an amendment in November 2024. Second, legislative instruments made by ASIC under the Corporations Act are rarely the subject of standalone litigation unless a party argues that the exemption was improperly applied or that conditions were not met. Third, disputes about the adequacy of disclosure in small insurance claims (under $5,000) are often resolved through internal dispute resolution or AFCA rather than court proceedings.

However, the instrument gives rise to potential factual disputes that could be litigated in the future. For example, the meaning of “expressly instructed” could be contested if the client claims they did not say they were in immediate need, or if the providing entity recorded a general statement as an express instruction. The 42-day period from the “insurable event” may be difficult to pinpoint for ongoing or gradual events (e.g., a building defect that becomes apparent over time). The phrase “all reasonable steps” is inherently fact-dependent; a court may need to decide whether a particular system for sending fact sheets or processing payments meets that standard.

The right of reversal may also generate litigation if the providing entity tries to impose additional conditions (e.g., requiring the client to sign a release) or if the client exercises the right and the entity refuses to honour it. The instrument does not specify the mechanism for reversal (e.g., must the client give notice in writing?), leaving room for dispute. Finally, the aggregate cap of $5,000 for “any other cash settlement offers” may be tricky if the insurer makes multiple offers over time; a client might accept one offer and later receive another, and the aggregate cap could be exceeded, potentially invalidating the exemption for the earlier offer.

No case law has yet interpreted these provisions. Practitioners should watch for future decisions from courts or from AFCA (which may consider the instrument in determining fairness of settlements). The lack of litigation history does not mean the instrument is risk-free; it means the boundaries are untested.

Several traps in the instrument can catch practitioners off guard. First, the $5,000 cap is an aggregate limit. It applies across all cash settlement offers made by the same providing entity on the same claim that are either accepted or still capable of being accepted. If an insurer makes a $4,000 offer and the client asks for another $2,000 for a separate part of the same claim, the total exceeds $5,000 and the exemption is lost for both offers. The insurer cannot split the claim into multiple offers to stay under the cap. And because the cap includes offers “that remain capable of being accepted,” a withdrawn or expired offer may still count if it has not been formally rejected or time-barred - the instrument does not specify when an offer ceases to be capable of acceptance.

Second, the 42-day period runs from the insurable event, not from the date of claim notification. This is a tight window. For a client who delays reporting a claim, the window may have already closed. Insurers must record the date of the insurable event carefully and cannot reset the clock by asking the client to resubmit a claim. If the verbal offer is made on day 43, the exemption does not apply, and the fact sheet must be given upfront.

Third, the client must “expressly instruct” that they are in immediate need. A casual statement such as “I need the money quickly” may not be sufficient if it is not an express instruction. The insurer should have a script or prompt to elicit a clear statement, and record it in the file. If the instruction is not given, the exemption fails.

Fourth, the requirement to make payment within 2 days of acceptance is a tight timeline. If the payment is delayed beyond 2 days (e.g., due to bank processing times or when a weekend intervenes), the exemption may be lost. The instrument says “take all reasonable steps to make the cash payment within 2 days” - if the delay is caused by the client providing incorrect bank details, the insurer may still be safe, but the burden of proof lies with the insurer.

Fifth, the right of reversal lasts 12 months from the date the cash payment was made, not from acceptance. If the payment is delayed, the reversal period starts later. The insurer must ensure the client is notified of this right and that it is exercised within the 12 months. The instrument prohibits charging any interest or fees on the amount of the cash payment, but it does not say anything about administrative fees for processing the reversal - a creative insurer might attempt to charge a fee for the reversal itself, which could be challenged as inconsistent with the spirit of the exemption.

Sixth, the instrument repeals itself on 1 April 2030. Insurers who design their claims processes around this exemption must plan for its expiry. If ASIC does not extend or remake the instrument, the timing requirement will revert to the original position, and insurers will need to adjust.

Seventh, the exemption only applies to “cash settlement offers” - that is, offers to settle using a cash payment. If the insurer offers a mix of cash and repair, the exemption may not cover the entire offer. The instrument is silent on whether a partial cash offer (e.g., $3,000 cash plus a repair of the remaining damage) qualifies. A cautious approach would be to apply the exemption only to wholly cash offers.

Compliance with the instrument requires a systematic approach by the providing entity’s claims and compliance teams. The first step is to identify whether a particular cash settlement offer qualifies for the exemption. The claims handler should check: (1) Did the client expressly state they are in immediate need of a cash payment because of the insurable event? This should be documented, preferably by a recorded phone call or a contemporaneous file note. (2) Is the verbal offer being made within 42 days of the insurable event? The date of the event must be verified from the claim file. (3) Does the total of this offer plus all other cash settlement offers made by the same entity on the same claim (accepted or still open) amount to $5,000 or less? A running tally should be kept per claim.

Once the qualification is confirmed, the claims handler should use a script that verbally gives the information and statements required by subsection 948F(1) of the Act. The script should cover: the amount of the offer, the basis for calculation (e.g., estimated cost of repair or replacement less excess), any key assumptions, and the client’s right to seek further information or to challenge the offer through external dispute resolution. The verbal disclosure must be given at the time the verbal offer is made; it cannot be deferred to a later phone call.

After the client accepts the verbal offer, the entity must take all reasonable steps to give the Cash Settlement Fact Sheet. For electronic delivery (email or portal), the target is within 48 hours of the verbal offer. For paper delivery, it is within 5 business days. The system should automatically generate and send the fact sheet as soon as possible after the verbal acceptance. If the client later requests a paper copy, the 5-business-day clock runs from the verbal offer, not from the request. The entity should also take all reasonable steps to process the cash payment within 2 calendar days of acceptance. This may require pre-authorised payment systems or fast-track approval for amounts under $5,000.

The entity must also provide the right of reversal on terms that include a 12-month exercise period from the date of payment and no interest or fees. This right should be communicated clearly, preferably in writing (in the Cash Settlement Fact Sheet or a separate notice). The terms may also require the client to repay the cash amount upon reversal, but must not impose fees. A sample clause: “You may cancel this settlement at any time within 12 months of receiving the payment. If you cancel, you must repay the full amount to us. No interest or fees will be charged.”

Record keeping is essential. The entity should retain: evidence of the client’s express instruction of immediate need, the verbal script used, the date and time of the verbal offer, the date and time the fact sheet was sent, the date payment was made, and the terms of the reversal right provided. These records will be needed if ASIC or the client challenges compliance. Finally, because the instrument self-repeals on 1 April 2030, the entity should monitor any proposed extension or replacement and plan for the cessation of the exemption.