Integrity Life Australia Limited, in the matter of Integrity Life Australia Limited

This Federal Court case is about insurance regulation and a court-approved transfer of life insurance business. Integrity Life Australia Limited asked the Court to confirm a scheme transferring part of its retail life insurance business to AIA Australia Limited under the Life Insurance Act 1995 (Cth).

The commercial setting matters. The Court’s catchwords state that Integrity was in breach of prudential capital requirements and that its capacity to meet policy owner benefits was expected to be exhausted by November 2027. So this was not simply a business deciding to sell a portfolio in the ordinary course. It was a transfer proposed in response to financial and regulatory pressure, with the stated objective of providing ongoing cover to transferring policy owners and improving financial security.

That context explains why the Court had to deal with a difficult feature of the scheme. The catchwords say some policy owners would face increased premiums and reduced benefits. Even so, the Court confirmed the scheme because the available material indicates policy owners would be worse off if the transfer did not proceed, and APRA supported confirmation.

The scheme transferred Integrity’s retail life insurance business conducted through its statutory fund in respect of the transferring life policies. The transfer was broader than just moving a list of customer policies. The scheme says the transferred business included the transferring assets and assumed liabilities connected with those policies.

On the asset side, that included investment assets referable to the transferring policies, rights and benefits under the policies, rights and benefits under transferring contracts, records relating to the policies, and reinsurance arrangements. On the liability side, AIA assumed liabilities relating to the retail life insurance business, including life policy liabilities and liabilities under the relevant contracts, except for excluded liabilities.

The scheme also drew clear boundaries around what did not move. Excluded assets included certain IT systems and platforms, intellectual property rights used by the business, excluded records and tax assets. Excluded liabilities included liabilities under the transfer deed, certain conduct and operational liabilities, and tax liabilities. For business readers, that is a useful reminder that a regulated transfer can move customer-facing obligations and policy liabilities without moving every operational asset behind the scenes.

The scheme also says the transferring life policies would remain on foot and there would be no cancellation and reissue of those policies as a result of the scheme. In practical terms, that means the transfer operated by force of the confirmed scheme rather than by each policy owner entering a fresh contract in the ordinary way.

One of the most important practical points in this case is that the transfer did not leave every policy owner in exactly the same position. The scheme itself distinguishes between different groups of transferring policies.

For policies listed in some schedule items, the terms and conditions would not change as a result of the scheme except for limited matters such as references to the issuer and statutory fund. For policies listed in other schedule items, the terms and conditions would be replaced from the scheme effective time by AIA policy terms and a replacement AIA policy schedule, in accordance with product transfer rules.

Those product transfer rules were designed to map existing cover into AIA cover on an equivalent or nearest equivalent basis. The catchwords expressly say the transferring policies would be replaced by equivalent or nearest equivalent rights and benefits, and that the product transfer rules sought to minimise detriment to policy owners. But the catchwords also make clear that this did not mean a perfect like-for-like outcome for everyone. Some policy owners would face premium increases and reductions in benefits.

For a business owner, that is the key plain-English point. A court-approved transfer can preserve continuity of cover without preserving every commercial feature of the old policy. If your business depends on a policy for key person protection, debt support, buy-sell funding or income replacement, you need to check whether your policy stayed on old terms, moved to replacement terms, or sits somewhere in between because of the transfer rules.

The scheme is detailed about what happens operationally once the transfer takes effect. From the scheme effective time, AIA becomes the issuer of the transferring life policies and Integrity ceases to be the issuer. The policy owners cease to be Integrity policy owners and become AIA policy owners.

The scheme also says that, subject to the specific changes in policy terms for some product groups, the rights and liabilities of transferring policy owners are to be the same as if their original applications had been made to and accepted by AIA, and as if AIA had originally issued the policies. That is the legal mechanism that allows the transfer to operate without each customer signing a new contract.

Claims handling is especially important. The scheme says that any person with a claim on or obligation to Integrity under a transferring policy has the same claim on or obligation to AIA instead. But there are important carve-outs for certain policy groups. Claims notified before the scheme effective time under Integrity Policies or Ex-CUNA Policies are to be assessed, or continue to be assessed, and paid by reference to the old policy terms for the life of the claim. Claims made after the transfer that arise from an insured event occurring before the transfer are also to be assessed by reference to the old terms for those policy groups. The scheme then includes further rules for specific reset and relapse situations under Integrity policies.

The scheme also addresses proceedings and complaints. Any proceedings connected with a transferring policy that are in progress, pending or later commenced must continue by or against AIA instead of Integrity, and AIA must be substituted as the party. Judgments, orders, awards, determinations and settlements are to operate as if made for or against AIA.

Pending applications are also dealt with. If an application for a transferring policy had not been accepted by Integrity by the scheme effective time, it is to be treated as an application to AIA, and any resulting policy takes effect as an AIA policy. Existing directions and authorities for premium deductions, payroll deductions, electronic transfers and information handling are deemed to be given to AIA instead of Integrity. The scheme also says AIA bears the obligation to pay commissions from the scheme effective time and may seek repayment of excess commission instead of Integrity.

For businesses, these mechanics matter because they affect who you contact, who debits your account, who handles your claim, and which policy wording governs a dispute or benefit decision.

The legal question was whether the Federal Court should confirm the scheme under section 194 of the Life Insurance Act 1995 (Cth). The difficult issue was not whether the transfer paperwork existed. It was whether the Court should approve the transfer even though some policy owners would be worse off in some respects, including through premium increases and reduced benefits.

The catchwords show the Court approached that issue by looking at the broader position. Integrity was in breach of prudential capital requirements. Its capacity to meet policy owner benefits was expected to be exhausted by November 2027. The scheme’s primary purpose was described as providing ongoing cover to transferring policy owners and improving financial security. The product transfer rules sought to minimise detriment. APRA supported confirmation. The catchwords also say policy owners would be worse off if the scheme were not confirmed.

Jackman J confirmed the scheme without modification. The orders state that the scheme for the transfer of part of Integrity’s life insurance business to AIA was confirmed and took effect from 12:01 am (AEST) on 1 March 2025. The applicants were ordered to pay APRA’s costs as agreed or assessed, and there was liberty to apply.

For business readers, the practical point is that customer detriment was not treated as an automatic veto. On the published material, the Court accepted that some adverse effects on policy owners did not prevent confirmation where the overall transfer was still the better outcome compared with the insurer’s deteriorating financial position.

If your business holds life insurance through an insurer involved in a transfer, this case is a reminder to read the transfer documents as carefully as you would read a policy renewal or endorsement. The insurer name on the policy can change by operation of a court-approved scheme. Claims obligations, complaint handling, policy administration and premium collection can move with it.

You should also avoid assuming that continuity of cover means no commercial change. The scheme here shows that some policy groups kept their existing terms while others moved to AIA terms under product transfer rules. The catchwords confirm that some policy owners would face higher premiums or lower benefits. That means the right question is not simply whether the policy still exists. The right questions are: what terms now apply, what claims are still assessed under old wording, who is responsible for remediation and complaints, and does the revised cover still meet your business needs?

This is especially important where the policy supports lending arrangements, shareholder agreements, buy-sell planning, key person risk management or income continuity for owners and senior staff. A change in insurer, premium or benefit structure can have knock-on effects well beyond the insurance file itself.

As an operating step, update your insurance register, note the effective date, keep old and replacement documents together, and check whether any active claim or complaint sits under old terms or new terms. If your broker, adviser, lender or trustee needs notice of the insurer change, deal with that promptly.