Australia has a vibrant InsurTech ecosystem and similarities between the UK and Australian insurance markets, together with the promise of sunny weather, make the land down under a great option for InsurTechs looking to set up shop abroad.
In this article, in collaboration with the UK Department for International Trade, we share some things to reflect on when considering Australia as part of your international expansion plan.
Key regulations for InsurTechs
Much like the United Kingdom, Australia operates a licensing regime for intermediaries and carriers. Intermediaries must be authorised under an Australian Financial Services Licence unless exempt. The regulator responsible for issuing AFSLs is the Australian Securities and Investments Commission (ASIC).
From 1 January 2022, claims handling is also a regulated service. A person who handles claims must be authorised under an AFSL unless exempt. This includes claims handlers acting on behalf of insurers, but also those acting on behalf of insureds for a fee. A limited exemption applies for insurance brokers.
Insurers must obtain authorisation from the Australian Prudential Regulation Authority unless exempt. Separate authorisation requirements apply for general, life and private health insurance companies.
Licensing and authorisation are involved activities. When launching down under, InsurTechs might initially consider operating as an intermediary under another person’s AFSL as a low cost and quick way to get to market. This is known as an authorised representative arrangement. InsurTechs might also qualify for various exemptions including under the Regulatory Sandbox.
Australia’s regulatory sandbox allows a person to test eligible financial services without holding an AFSL for up to 24 months. For insurance, policies must be issued by a locally authorised insurer. An aggregate Gross Written Premium limit of $5 million applies. The regulatory sandbox provides relief from AFSL licensing requirements only and does not apply to the authorisation required to be an insurer.
An entity can apply at any time to use the regulatory sandbox by showing they meet the net public benefit test and the innovation test. See our blog article for more detail on these two tests.
State of the InsurTech market
The Australian InsurTech ecosystem is vibrant and constantly growing. The key industry body is InsurTech Australia. InsurTechs in Australia include new underwriting agencies, managing general agents (MGAs), claims administrators, loss adjusting technologies, underwriting technology and white label technology providers.
The majority of InsurTechs work with locally authorised insurers rather than act as market disruptors. Accordingly, InsurTechs generally enjoy close collaboration with locally authorised insurers with a number of local insurers having established specialist units to invest in new technologies. These include QBE Ventures and IAG Labs.
With Australia’s susceptibility to natural disasters, there are a number of InsurTechs looking at disaster mitigation, underwriting of flood or bushfire prone areas, and loss assessment following a natural disaster.
Main challenges for new entrants
There are a number of considerations for UK InsurTechs entering the Australian market. On the surface, it may seem that the main challenge is finding and maintaining new customers, but there are other considerations to be mindful of such as:
- Localisation: adapting messaging, content, products, and services to meet the specific Australian market and potential customers. Although the UK and Australia have similar cultures and values, there are certain nuances that should be researched such as subtleties in different communication styles and cultural preferences.
- Regulations: When you do have the ideal solution for the local market, there is the challenge to ensure that your offer meets all the regulatory and legal requirements. It is important to understand the Australian regulatory environment and requirements at the beginning of the expansion process to ensure that any obstacles or issues can be addressed early.
- Establishing the business in Australia: There are certain requirements such as registering an Australian Business Number (ABN), taxation and employment arrangements, and setting up a bank account. Consider engaging the services of legal and accountancy professionals to assist with this process to make sure you meet the requirements.
- Operating in Australia: Be mindful of time differences between the UK and Australia, with Australia being ahead of the UK +7 hours (Perth) to +9 hours (East Coast – Brisbane, Sydney, Melbourne) during BST and as much as +11 hours in Australian summer time. The advantages are that Australia’s time zones provide excellent follow-the-sun support coverage for your customers, and can be a great stepping-stone into south-east Asian markets which are all in similar time zones to Australia.
Seeking professional services to obtain the right advice will ensure entering Australia is a smooth process. The Department for International Trade can support with providing market entry advice, support and connections in Australia to help you successfully launch your InsurTech into the Australian market.
The road ahead – Opportunities under the new UK <-> Australia Free Trade Agreement
The UK-Australia Free Trade Agreement (FTA) was signed in December 2021 and is an historic deal providing even greater opportunities for InsurTechs to access the Australian market.
The agreement includes establishment of a Joint Financial Regulatory Forum between UK and Australian Treasuries. This dialogue aims to increase collaboration around shared objectives and principles, including greater compatibility and coherence between regulatory and supervisory frameworks and approaches to financial innovation.
It will also be easier for senior employees of companies to move on intra-company transfers to Australia. They will be eligible for visas of up to 4 years instead of 2, and their spouses and dependent children will also have the right to work during a transfer for up to 4 years.
Both countries have also agreed to enable the free and trusted flow of data cross-border to ensure financial institutions and other service suppliers can operate cross-border with Australia without data localisation requirements. This means that UK businesses are not obliged to store financial data in Australia.
The FTA also provides a legally guaranteed right for UK companies to bid for financial and business services contracts for procurement by Australian and state governments. Fewer UK investments will need to go through Australia’s Foreign Investment Review Board. Once the FTA is ratified, only investments over AUSD $1.2 billion (with exception of investments in sensitive sectors) will be subject to review, more than quadrupling the UK’s previous threshold.
Feel free to reach out to the authors to discuss your InsurTech plans. We’d be happy to hear from you.
Steve Walker | Trade Development Manager – Financial & Professional Services (Australia and New Zealand)
British Consulate-General Melbourne, Level 17, 90 Collins Street, Melbourne, VIC 3000
Tel: +61 (0)417 724 358 | Email: firstname.lastname@example.org
Elisa Henderson | Senior Manager – Business Relations (Financial and Professional Services), Australia, New Zealand – Trade
British Consulate-General Brisbane, Level 9, 100 Eagle Street, Brisbane, 4000
Tel: +61 (0)451 418 279 | Email: email@example.com
Caitlin Gheller | Programme Manager – Australia and New Zealand Free Trade Agreement Delivery
British Consulate General Melbourne | Level 17, 90 Collins Street | Melbourne VIC 3000
Mobile: +61 (0) 467 765 579 | E-mail: firstname.lastname@example.org
Tim Chan | Senior Associate & InsurTech Lead (Australia)
Norton Rose Fulbright Australia, Level 5, 60 Martin Place, Sydney NSW 2000
Tel: +61 (0)2 9330 8472 | Email: email@example.com
Ray Giblett | Partner
Norton Rose Fulbright Australia, Level 5, 60 Martin Place, Sydney NSW 2000
Tel: +61 (0)2 9330 8531 | Email: firstname.lastname@example.org