Life Insurance Act 1945

Life Insurance Act 1945

This Act creates a comprehensive federal framework to regulate the life insurance industry in Australia, protecting policyholders and ensuring companies remain financially solvent.

What it does:

• Registers all life insurance companies and requires them to lodge security deposits (up to £50,000) with the Treasurer as protection for policyholders
• Protects policyholder money through "statutory funds" — legally separate pools of assets that must be kept distinct from shareholders' funds and other business operations. Companies cannot mortgage these funds or use them for non-insurance purposes
• Sets financial safeguards requiring rigorous actuarial investigations (financial health checks) every five years, audited annual accounts, and strict rules on how premiums can be invested
• Protects policies from creditors — life insurance proceeds generally cannot be seized by courts to pay the policyholder's debts, and family protection policies create trusts for spouses and children
• Guarantees policy values by giving owners rights to "surrender values" (cash if they cancel after 6 years) and "paid-up policies" (reduced coverage if they stop paying premiums after 3 years)
• Establishes the Commonwealth Government Insurance Office — a government-owned competitor to private insurers, backed by the Commonwealth guarantee