Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 2 Amendments to the Life Insurance Act 1995
Outline of chapter
2.1 Schedule 1 to the Bill will amend the Life Insurance Act 1959 (Life Insurance Act) to provide for new arrangements for unclaimed moneys held by life insurance providers.
Context of amendments
2.2 Currently, life insurance providers are required to assess all accounts to determine if they consist of unclaimed moneys by 31 December each year and transfer any that do to the Commonwealth by 31 March of the following year (subsections 216(1), 216(3) and 216(6) Life Insurance Act).
2.3 An account held by a life insurance provider consists of unclaimed moneys if there have been no transactions in the account other than interest or charges in the previous three years (subsection 216(16), Life Insurance Act).
2.4 Many of the accounts that are transferred to the Commonwealth are still effectively active as the account holder remains aware of them. Around 9 per cent of life insurance accounts are reclaimed in the same year as they are transferred to the Commonwealth and 50 per cent of all funds transferred are reclaimed within two years.
2.5 The high proportion of effectively active accounts that are transferred to and reclaimed from the Commonwealth creates a regulatory burden for life insurance providers and account holders. Life insurance providers have to assess and transfer all accounts with unclaimed moneys to the Commonwealth even though the accounts may still be effectively active. Once these accounts are transferred, account holders have to complete the necessary paperwork and verify their details in order to reclaim their accounts.
2.6 Information on unclaimed moneys is released under the Freedom of Information Act 1982 (FOI Act) and is published on the ASIC website. Details of unclaimed moneys is also searchable online via the ASIC Money Smart website
2.7 The level of information available has created the opportunity for groups to approach account holders offering to reunite them with their account for a fee. Account holders can reclaim their money from the Government at no charge. The level of information could also potentially be used for identity theft.
Summary of new law
2.8 The new law amends the Life Insurance Act to extend the unclaimed moneys period from three years to seven years from 31 December 2015.
2.9 The new law amends the Life Insurance Act to introduce a secrecy provisions to prevent access to information on unclaimed moneys via the FOI Act. Details on unclaimed moneys in life insurance accounts will still be able to be published in any way as determined by the Treasurer.
Comparison of key features of new law and current law
| New law | Current law |
| Life insurance accounts consist of unclaimed moneys seven years after there are no transactions other than interest and charges unless an exemption applies. | Life insurance accounts consist of unclaimed moneys three years after there are no transactions other than interest and charges unless an exemption applies. |
| A secrecy provision prohibits the disclosure of information on unclaimed moneys unless provided for in the Insurance Act. | Details on unclaimed moneys can be sought under FOI requests and is published on the ASIC website. |
Detailed explanation of new law
2.10 The Bill modifies the definition of unclaimed moneys in subsection 216(1) of the Life Insurance Act by increasing the time before a life insurance account is assessed as unclaimed moneys from three years to seven years. [Schedule 1, item 8, subparagraph 69(15 )(c)(i)]
2.11 The Bill creates a secrecy provision that prevents the disclosure of information relating to life insurance accounts with unclaimed moneys unless authorised by subsection 216 of the Life Insurance Act. The secrecy provision applies in relation to the FOI Act which will ensure that access to information on life insurance accounts with unclaimed moneys via the FOI Act is only available the people to whom the information relates (or their agent). [Schedule 1, item 9, section 216A]
Consequential amendments
2.12 Section 38 of the FOI Act provides that a document is exempt from freedom of information applications if it is prohibited under a provision of another Act and the provision is specified in Schedule 3 of the FOI Act.
2.13 The Bill amends schedule 3 of the FOI Act to prescribe that the secrecy provision that is being introduced in subsection 216A(2) of the Life Insurance Act is a provision to which section 38 of the FOI Act applies. [Schedule 1, item 10, Schedule 3 of the FOI Act]
2.14 This will mean that information related to unclaimed life insurance accounts (such as the name and recorded address of the account holder) will not be available under the FOI Act to anyone other than the person to whom the information relates (or their agent).
Application and transitional provisions
2.15 The amendments in this Chapter to the Life Insurance Act will commence on 31 December 2015.