What is the Financial Accountability Regime?
The Financial Accountability Regime (FAR) represents Australia's most significant regulatory overhaul of the financial services industry in decades. Implemented on March 15, 2025, for insurance companies, FAR replaces and expands the former Banking Executive Accountability Regime (BEAR) to now cover banks, insurers, and superannuation funds.FAR was born from the Banking Royal Commission's findings, which exposed systematic failures in corporate governance, risk management, and customer treatment across Australia's financial sector. The regime aims to rebuild public trust by ensuring individual executives are personally accountable for their institutions' actions.
Core Principles Behind FAR
The regime operates on four fundamental pillars designed to protect consumers and improve institutional behavior:Accountability Obligations: Senior executives must take "reasonable steps" to prevent breaches of financial laws within their areas of responsibility. This shifts the burden from reactive punishment to proactive prevention.
Key Personnel Requirements: Insurers must clearly identify and register their most senior executives (called "Accountable Persons") with regulators, mapping exactly who is responsible for what.
Deferred Remuneration Rules: Executive bonuses and variable pay are now subject to strict deferral and clawback provisions, aligning executive incentives with long-term customer outcomes.
Enhanced Notification Obligations: Insurance companies must promptly inform regulators about significant issues, breaches, and changes in executive responsibilities.
Which Insurance Companies Are Covered?
Not all insurers fall under FAR – the regime targets the largest and most systemically important companies. The threshold requirements are:
- General insurers: Total assets of $10 billion or more
- Life insurers: Total assets of $10 billion or more
- Health insurers: Total assets of $3 billion or more
Who Are "Accountable Persons" and Why Should Customers Care?
Accountable Persons are the senior executives personally responsible for how your insurer operates. These aren't just ceremonial titles – these individuals face personal consequences if their areas of responsibility fail customers or breach regulations.The Executive Accountability Web
FAR requires insurers to identify executives responsible for critical customer-facing functions, including:- Claims processing and decision-making
- Product design and distribution
- Customer complaints handling
- Risk management and compliance
- Technology systems and data management
- Operational resilience and business continuity
What this means for customers: When you file a claim or complaint, there's now a specific senior executive whose personal accountability is on the line for how you're treated. This creates powerful incentives for better customer service and fairer outcomes.
Massive Financial Penalties: The New Enforcement Reality
FAR introduces some of the harshest financial penalties in Australian corporate law. The maximum civil penalties are designed to make non-compliance prohibitively expensive:
For Insurance Companies:
- $16.5 million (50,000 penalty units), or
- Three times the benefit gained from the breach, or
- 10% of annual turnover (capped at $825 million)
For Individual Executives:
- $1.65 million (5,000 penalty units) for Accountable Persons
- Potential imprisonment for failing to comply with regulatory directions
- Disqualification from working in financial services
How FAR Protects Insurance Customers
Proactive Problem Prevention
Unlike previous regulations that focused on punishment after problems occurred, FAR requires executives to take "reasonable steps" to prevent issues before they impact customers. This includes:- Early warning systems to identify potential claims handling delays
- Regular monitoring of customer complaint patterns
- Proactive system upgrades to prevent technology failures
- Staff training programs to ensure fair customer treatment
- Faster Resolution of Issues
With personal executive accountability on the line, insurers now have powerful incentives to resolve customer problems quickly. The regime's notification requirements mean regulators learn about problems faster, enabling earlier intervention.
Improved Claims Handling Standards
FAR works alongside existing consumer protections like the duty of utmost good faith and requirements to provide services "efficiently, honestly and fairly". The combination creates multiple layers of protection – executives face personal consequences for poor claims handling, while existing laws provide direct customer remedies.Enhanced Transparency and Reporting
Insurers must now provide detailed accountability maps showing exactly which executives are responsible for what functions. This transparency helps customers and regulators understand decision-making structures and identify accountability gaps.The Joint APRA-ASIC Administration Model
FAR is unique in being jointly administered by two regulators, each focusing on different aspects of consumer protection:APRA's Role:
- Prudential supervision – ensuring insurers remain financially sound
- Systemic stability – preventing industry-wide problems
- Capital and liquidity requirements – protecting policyholders' financial interests
ASIC's Role:
- Consumer protection – ensuring fair treatment of customers
- Market integrity – preventing misconduct and fraud
- Claims handling oversight – enforcing fair claims processes
This dual oversight means customer issues get attention from multiple angles – ASIC focuses on immediate consumer harm while APRA ensures the insurer remains financially capable of meeting future obligations.
Real-World Impact: What Has Changed Since March 2025
Improved Executive Decision-Making
Early observations from the banking sector's FAR implementation show that personal accountability drives better decision-making. Insurance executives are now more cautious about decisions that could harm customers, knowing they face personal consequences.Enhanced Risk Management
Insurers have strengthened their risk management frameworks to meet FAR requirements. This includes better monitoring of claims processing times, customer satisfaction metrics, and operational risks that could impact service delivery.Faster Regulatory Response
The enhanced notification requirements mean regulators learn about problems faster. When issues arise, APRA and ASIC can intervene earlier to protect customers rather than waiting for problems to escalate.What This Means for Your Insurance Experience
Better Customer Service Incentives
With executives personally accountable for customer outcomes, insurers have stronger incentives to:- Process claims fairly and promptly
- Resolve complaints quickly
- Invest in better technology systems
- Train staff properly
- Maintain adequate staffing levels
More Responsive Complaint Handling
When you raise concerns with your insurer, those complaints now flow up to executives who face personal consequences for poor outcomes. This creates powerful incentives for fair and prompt resolution.Stronger Financial Protection
FAR's prudential oversight requirements ensure insurers maintain adequate capital and operational resilience. This protects your ability to make successful claims even during challenging economic conditions.Understanding Your Rights Under FAR
Existing Consumer Protections Remain
FAR doesn't replace existing consumer rights – it adds an additional layer of protection. You still have:- Rights under the Insurance Contracts Act
- Protections from the duty of utmost good faith
- Access to the Australian Financial Complaints Authority (AFCA)
- Coverage under industry codes of practice
Enhanced Regulatory Oversight
If you experience problems with your insurer, regulators now have:- Better visibility into insurer operations through enhanced reporting
- Stronger enforcement tools including personal executive accountability
- Clearer responsibility mapping to identify where problems originate
Improved Transparency
Insurers must now maintain clear accountability maps showing which executives are responsible for different functions. While these aren't public documents, they help regulators quickly identify accountability when problems arise.Looking Forward: The Long-Term Impact
Cultural Change in Insurance
FAR is designed to drive long-term cultural change in how insurers operate. By making executives personally accountable, the regime creates incentives for:- Customer-first thinking in strategic decisions
- Proactive risk management rather than reactive problem-solving
- Investment in operational excellence rather than cost-cutting at customer expense
- Ethical leadership throughout the organization
Industry-Wide Improvements
As FAR implementation matures, customers should expect:- More consistent service standards across major insurers
- Faster adoption of new technologies to improve customer experience
- Better coordination between different parts of insurance companies
- Reduced likelihood of widespread industry misconduct
Regulatory Evolution
APRA and ASIC continue refining their joint administration approach based on early implementation experiences. This ongoing evolution should lead to more effective oversight and better consumer outcomes over time.Practical Steps for Insurance Customers
Stay Informed About Your Insurer
- Check if your insurer falls under FAR (companies with assets over $10 billion for general and life insurers, $3 billion for health insurers)
- Understand that executive accountability provides additional protection beyond standard consumer rights
Document Your Interactions
- Keep records of claims submissions, complaint communications, and responses
- Note delays or unsatisfactory service – these may trigger executive accountability requirement
Know Your Escalation Options
- Start with your insurer's standard complaint process
- Escalate to AFCA if unsatisfied with the response
- Report systemic issues to ASIC or APRA
Understand the Bigger Picture
- Recognize that FAR creates long-term incentives for better service
- Be aware that major service failures now have personal consequences for executives
- Appreciate that regulatory oversight has been significantly strengthened
The Financial Accountability Regime represents a fundamental shift in how Australian insurance companies operate and are held accountable. While the full benefits will emerge over time as the regime matures, the enhanced executive accountability, stronger regulatory oversight, and significant financial penalties create powerful new protections for insurance customers. By making senior executives personally responsible for customer outcomes, FAR aligns insurer incentives with customer interests in unprecedented ways, promising a more trustworthy and responsive insurance industry for all Australians.