PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT BILL 2008 Explanatory Memorandum
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT BILL 2008
2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT BILL 2008
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health and Ageing,
the Honourable Nicola Roxon MP)
PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT BILL 2008
OUTLINE
This Bill provides for a number of amendments to the Private Health Insurance Act 2007
(the Act), and a range of other Acts, primarily for the purpose of regulating private health
insurance more consistently and equitably.
All provisions included in the Bill will commence from the date on which it receives the
Royal Assent.
Schedule 1 of the Bill contains amendments to the Australian Securities and Investments
Commission Act 2001 (the ASIC Act), the Corporations Act 2001 (the Corporations Act), the
Insurance Act 1973 (the Insurance Act) and the Insurance Contracts Act 1984 (the Insurance
Contracts Act).
The amendments will remove the requirement for dual regulation of health-related business
conducted through health benefits funds by the Private Health Insurance Administration
Council (the Council) and the Australian Prudential Regulation Authority (APRA). Under
the Act and the Health Legislation Amendment Act 2007, the Council regulates health
insurance business and health-related business conducted through health benefits funds until
30 June 2008. From 1 July 2008, health-related business conducted through health benefits
funds will be subject to dual regulation by the Council and APRA. Consultation with
industry and the Council has revealed that dual regulation will be burdensome and costly.
Consequently, the Bill seeks to amend the ASIC Act, the Corporations Act, the Insurance Act
and the Insurance Contracts Act to ensure that health-related business that is conducted
through a health benefits fund remains solely regulated by the Council.
Currently, in the Act there are several references to the constitutions of private health insurers
who are or will be restricted access insurers. Schedule 2 of the Bill inserts the words "or
rules" to these references to ensure that the relevant provisions of the Act can be satisfied by
inclusion of statements in relation to membership in the rules or the constitution of the
restricted access insurers.
Schedule 3 of the Bill amends the Act to require a body to be a company within the meaning
of the Corporations Act in order to apply to the Council for registration as a private health
insurer. The current legislation permits a registered body within the meaning of the
Corporations Act to apply to the Council for registration as a private health insurer. While
the majority of private health insurers are companies, some are registered bodies. The
current requirements mean that there is potential for inconsistency and significant complexity
in regulating private health insurers. Requiring all private health insurers to be companies
within the meaning of the Corporations Act will mean that they are all subject to the same
accountability standards and governance requirements.
Registered bodies will have until 1 January 2010 to make the transition from registered body
to company. There is also a transitional provision which provides that in the unlikely event
that a body that is not a company applies to become a private health insurer before the
commencement of the Bill, the application ceases and a new application which complies with
the requirement to be a company must be made after commencement. All private health
insurers that were registered under the National Health Act 1953 that were not companies
have been re-registered under the Act.
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Schedule 3 of the Bill also ensures that registered bodies who become companies within the
meaning of the Corporations Act for the sole purpose of registering as private health insurers
under the Act during the transitional period will not be liable for stamp duty or other taxes by
the States or Territories. This exemption will apply to those registered bodies who become
companies for that purpose prior to 1 January 2010.
Schedule 4 of the Bill clarifies that offering a discounted premium for a corporate product
does not constitute a breach of the principle of community rating. A corporate product is a
policy offered at a discounted premium where a person covered by the policy is an employee
of, or contracted to provide services to, a particular person or body. The proposed
amendments also clarify that corporate products are open to all, however the discount may be
available if the policy covers a person who is employed by, or contracted to provide services
to, a particular person or body.
Schedule 5 of the Bill provides that conducting a pilot project in accordance with the Private
Health Insurance (Complying Product) Rules does not constitute a breach of the principle of
community rating. The amendments give the Minister for Health and Ageing powers to
make rules that permit pilot projects as specified in those rules.
Financial Impact Statement
This Bill has no financial impact for the Government.
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REGULATION IMPACT STATEMENT: REQUIREMENT FOR PRIVATE
HEALTH INSURERS TO BE COMPANIES UNDER THE CORPORATIONS ACT
2001
This Regulation Impact Statement (RIS) has been prepared by the Commonwealth
Department of Health and Ageing (the Department) in accordance with the guidelines set out
by the Office of Best Practice Regulation. Its purpose is to assist the Australian Government
consider the reasons for, and impacts of, a proposed amendment to the Private Health
Insurance Act 2007 (the Act) for regulation of private health insurers.
Specifically, the RIS addresses the impacts that may be experienced by a small number of
private health insurers if the registration requirements under the Act are amended such that
all insurers must be companies within the meaning of the Corporations Act 2001
(Corporations Act) in order to be registered as private health insurers. The large majority of
private health insurers are already companies within the meaning of the Corporations Act and
the proposed amendment would therefore have no impact on them.
The RIS assesses the current regulatory environment, the inadequacies that have led to the
proposed amendment and the benefits of all private health insurers being companies. It also
outlines the outcomes of consultation on this issue, details concerns that have been raised
regarding regulatory shift and considers options for addressing these concerns.
The RIS concludes that making it a regulatory requirement for all private health insurers to
be companies would have a net benefit and therefore an amendment to the relevant
legislation is recommended.
Background
New legislation in the form of the Act commenced on 1 April 2007.
A central tenet of the Act is that organisations must be registered as private health insurers in
order to carry out health insurance business.
Part 4-3 of the Act deals with the registration of organisations as private health insurers by
the Private Health Insurance Administration Council (the Council). Section 126-10 deals
specifically with the types of entities that may apply for registration as follows:
126-10 Applying for registration
(1) A body that is:
(a) a company within the meaning of the Corporations Act 2001,
or a registered body within the meaning of that Act; and
(b) a *constitutional corporation;
may apply to the Council for registration as a private health insurer.
The Act replaced the provisions in the National Health Act 1953 (the NHA) relating to
regulation of private health insurance. The NHA was amended in 2000 in response to
concerns raised in the Industry Commission report on the private health insurance industry
(Industry Commission Report No 57 of February 1997), particularly in relation to the
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"potential for conflicts of interest and lack of accountability and transparency in some current
governance arrangements"1.
The NHA was amended to require that an organisation must be a company limited by shares,
by guarantee, or by both shares and guarantee, in order to apply for registration as a
registered health benefits organisation. The amendment included a provision requiring
currently registered organisations that were unincorporated associations to transfer their
health insurance business to a company within a time period specified by the Minister. While
most insurers complied with the requirement and became companies, the fact that some
insurers remain as registered bodies or have only recently become registered bodies indicates
that these insurers were not followed up.
Of the 38 private health insurers in Australia, 34 are companies and four are registered bodies
within the meaning of the Corporations Act.
Problem
Since the Act commenced the Council, as the prudential regulator of the private health
insurance industry, has expressed its desire that all private health insurers be companies
within the meaning of the Corporations Act, in order to regulate the industry effectively and
consistently.
The Council has indicated that it will be difficult for the Council or the Department of Health
and Ageing to enforce the Act in relation to the four insurers who are registered bodies in the
event of breaches of solvency or capital adequacy or indeed breaches in relation to payment
of benefits or inappropriate treatment of policy holders and insured persons.
For registered bodies under the Corporations Act who operate across state borders (as is the
case with the four private health insurers who are registered bodies) the directors' duties
provisions of the Corporations Act would only apply to the interstate part of the business.
That provides a significant complexity for appropriate regulation where different parts of the
same business would have to be treated differently for regulatory purposes.
Division 1 of Part 2D.1 of the Corporations Act imposes obligations on directors of
companies to act with care and diligence, to act in good faith, and not to misuse information.
However, a director of a registered body that is an incorporated association is subject to the
directors' duties provisions of the Corporations Act only in respect of its interstate business
and activities. This is because of section 190A of the Corporations Act, which provides:
"This Division does not apply to an act or omission by a director or other officer or
employee of a corporation that is a registrable Australian body unless the act or
omission occurred in connection with:
(a) the body carrying on business outside its place of origin;
(b) an act that the body does or proposed to do outside its place of origin; or
(c) a decision by the body whether or not to do or refrain from doing outside its place
of origin."
1
Industry Commission Report No. 57, 28 February 1997.
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Regulation of directors in respect of the conduct of business in their home State or Territory
is the responsibility of the authority in that State or Territory responsible for administering
the incorporated associations legislation in that State or Territory.
A registered private health insurance organisation, Goldfields, which was an incorporated
association in Western Australia, failed in December 2002. Policyholders were transferred to
another health fund and they were protected from that failure. The claims were paid and their
membership has continued.
The Council identified a number of breaches of the NHA and what would appear to have
been breaches of the Corporations Act. However, as Goldfields was an incorporated
association, the directors could not be held accountable under the Corporations Act. The
Council referred the matter to the state Government for action.
While the four insurers remain as registered bodies, the Council is hampered in its ability to
achieve its legislated objectives of:
fostering an efficient and competitive health insurance industry;
protecting the interests of consumers; and
ensuring the prudential safety of individual private health insurers.
Protecting the interests of the members of the four insurers would be particularly
problematic, as the Council would have limited power to take appropriate action in respect of
breaches of prudential regulation that may result in a loss for consumers.
Health funds are in a competitive marketplace and the same rules should apply to all
participants. Most insurers started as incorporated associations and over time have
incorporated under the Corporations Act.
There is a considerable public subsidy through the private health insurance rebate. Taxpayers
are entitled to be assured that all insurers that receive that subsidy are publicly accountable in
an identical manner. This ensures appropriate levels of competition and transparency.
Objectives of government action
The objectives of the proposed change are:
to ensure consistency of accountability standards and governance requirements for
private health insurers; and
to ensure that the regulator has the capacity to appropriately investigate and address,
with any insurer, issues such as solvency, capital adequacy and care and diligence, as
they arise.
Options
Option 1: Status quo
Under this option, an insurer can be a company or a registered body within the meaning of
the Corporations Act and be able to apply to register as, or be registered as, a private health
insurer.
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Option 2: Regulate to require private health insurers to be companies
Under this option, the legislation would be amended to require that insurers must be
companies under the Corporations Act in order to apply for, or be registered as, private health
insurers.
Impact analysis
Option 1: Status Quo
Impact on Government
If the status quo remains, the Council and the department would continue to have limited
capacity to investigate and address matters relating to the operations and governance of the
private health insurers who are not companies. These insurers will not be subject to the same
legal and financial accountability requirements as the large majority of insurers who are
already incorporated as companies.
While the four insurers remain as registered bodies and under different accountability
requirements, the Council is hampered in its ability to achieve its legislated objectives of:
fostering an efficient and competitive health insurance industry;
protecting the interests of consumers; and
ensuring the prudential safety of individual private health insurers.
Impact on private health insurers
Currently the playing field for regulation of private health insurers is not level, as the four
insurers who are registered bodies are subject to different and less stringent regulation than
those who are companies. It is unfair for the insurers that have become companies that they
are subject to more stringent legal and financial accountability requirements than the insurers
that are registered bodies.
Impact on consumers
While the four insurers who are registered bodies are subject to less stringent regulation and
scrutiny, there is greater risk for persons insured by them of improper use of funds,
insufficient funds being available to pay benefits and failure of the fund.
Option 2: Regulate to require private health insurers to be companies
Impact on Government
All insurers would be regulated equally and held to the same high standards of accountability
and reporting.
There would be increased likelihood of successful prosecution in relation to breaches of
relevant legislation.
The Council would be better able to achieve its legislated objectives:
fostering an efficient and competitive health insurance industry;
protecting the interests of consumers; and
ensuring the prudential safety of individual private health insurers.
With improved capacity to regulate them, the Council would be better placed to reduce the
risk of failure of the four insurers, due to the higher standards of reporting and accountability.
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There are no cost implications for the government.
Impact on private health insurance industry
Only four private health insurers of 38 are not companies under the Corporations Act:
Latrobe Health Services Inc - 0.6 percent market share
Health Insurance Fund of WA - 0.4 percent market share
HBF Health Funds Inc - 7.5 percent market share
South Australian Police Employees' Health Fund Inc - 0.3 percent market share.2
Together, these insurers represent approximately 8.8 per cent of the market.
The four insurers who are not incorporated as companies have a competitive advantage
through a lack of transparency compared with their competitors. Their directors are less
accountable and there is a lower likelihood of a successful prosecution in relation to breaches
of accountability in relation to the organisation's operation if they are not health insurance
related breaches which are dealt with under the Act.
If all private health insurers were required to become companies, they would be subject to the
same accountability. Instead of being regulated under two different regimes, all insurers
would be regulated equally under the Corporations Act.
Impact on the private health insurers affected
One-off costs
The department consulted with insurers affected by this measure and an insurer that has
recently become a company to investigate the pathway to becoming a company, and the
likely costs for their organisations. Steps in the pathway include:
Changing the organisation's constitution or operating rules
Informing members of the intention to become a company
Seeking approval of members for the change to the constitution, via a special
resolution at an annual general meeting (if required)
Changing stationery, brochures, etc, to reflect the organisation's changed status
Applying to the Australian Securities and Investment Commission to become a
company.
The proposed "deadline" for currently registered private health insurers to become companies
is 1 January 2010. This will give them ample time to incorporate some of the steps above
into their regular activities, such as an annual general meeting, advice to policyholders of
premium changes and regular review of stationery and brochures. This means that there will
be little, if any, additional cost resulting from becoming a company in relation to these areas.
Insurers will need to get legal advice on matters relating to the change to a company,
including changes to the organisation's constitution and the status of current contracts and
agreements.
The fee to apply to ASIC to be registered as a company is currently $330.
2
Source: Private Health Insurance Administration Council, Operations of the Private Health Insurers Annual
Report 2006-2007
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The department estimates that becoming a company will impose similar compliance costs on
all four insurers. These costs may have more of an impact on the smaller insurers as they are
spread over a smaller client base. However the department believes that these costs will not
be onerous.
Two of the insurers involved, including the largest of the four, have investigated the pathway
to becoming a company and agreed that a reasonable estimate of the cost of becoming a
company is about $200,000, largely comprised of legal fees. The other insurers have
provided conservative estimates of $450,000 to $700,000 and $500,000. Neither of these
insurers has fully investigated the steps involved in becoming a company, and the department
considers that some of the costs they have included may be associated with actions and issues
that are not directly related to the task of becoming a company.
The two insurers based in Western Australia have significant concerns about stamp duty and
other State and Territory taxes that may be imposed on them if they incorporate as a company
under the Corporations Act. The policy of the Government is that private health insurers
should be exempt from paying stamp duty or any other form of tax that may arise under State
and Territory law as a result of complying with the requirement to be a company in order to
be registered as a private health insurer. The proposed amendment will therefore include a
provision that stamp duty or any other tax imposed under a law of a State or Territory is not
payable by a body in relation to registration as a company in order to comply with the
requirements to register as a private health insurer.
Ongoing costs
There is an annual review fee of $212.
There should be no other significant ongoing costs associated with these insurers becoming
companies.
Competition
The department also considered whether there would be any impact on competition. The
proposed change would apply equally to the four insurers affected, so there are no issues of
competition between them. The insurers that are already companies under the Corporations
Act have been exposed to the costs of becoming a company at some time in the past, so there
is no issue of competition between the affected insurers and those who are already
companies.
Impact on Consumers
If the costs involved in incorporating as a company can be kept to a minimum, there should
be no discernable impact on consumers.
Policy holders of the four insurers can be more confident that their insurers will be more
financially accountable and more transparent in their governance. They can also be more
confident that there will be less risk of the insurers failing due to the higher standards of
reporting and accountability.
Consultation
The department consulted widely with the private health insurance industry in drafting and
implementing the Act. An exposure draft of the Private Health Insurance Bill 2006 was
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released; however it included the requirement that bodies should be companies or registered
bodies although the issue of insurers becoming companies was specifically raised.
The Council strongly supports the requirement for all health insurers to be companies.
The department has also consulted specifically with the affected insurers to ascertain the
impact of the proposed change on their business. Most accept that the proposed change is
inevitable. One CEO was critical of the time and resources that the insurer had already
committed to learning about the private health insurance reforms and the consultation
process; however this related to the introduction of the Act and not to becoming a company.
Conclusion and recommended option
The recommended option is to mandate that all insurers be companies under the Corporations
Act.
While there would be some immediate impacts on the small number of insurers that would
need to change their status, it is believed that these would not be ongoing. It is also
considered that these short term impacts can be ameliorated to some degree by not requiring
that registered private health insurers become companies until 1 January 2010. The impacts
will be more than offset by the benefits of uniform accountability requirements across all
private health insurers - benefits that would accrue to insurers as a whole, the Australian
Government and, in turn, the wider community.
Implementation and Review
Legislation
It is planned to implement the recommended option through a legislation amendment bill
currently being prepared.
The bill will amend the relevant sections of the Act to:
require existing health insurers to be companies under the Corporations Act by
1 January 2010;
require bodies applying to be registered as private health insurers to be companies
under the Corporations Act; and
exempt bodies becoming companies under the Corporations Act in order to comply
with the registration requirements for private health insurers from incurring stamp
duty or any other taxes imposed by State or Territory law.
Informing health insurers
The department will advise the four registered private health insurers of the requirement to
become a company under the Corporations Act, and the timeframe for them to comply, by
writing to the Chief Executive Officer of each body.
The department will advise other registered private health insurers of the change in
legislation by way of an industry circular.
Information about the requirement to be a company under the Corporations Act will be
provided to each potential new insurer who seeks registration as a private health insurer.
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Informing consumers
The department anticipates that members of the four current private health insurers affected
by this measure will be advised by the insurers.
Review
The department and the Council will monitor the four currently registered private health
insurers to ensure that they comply with the amended legislation.
The success of the proposed regulation in achieving the desired outcome will be evident if
and when the Council or the department need to take action in respect of a breach of
accountability or reporting requirements.
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PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT BILL 2008
NOTES ON CLAUSES
Clause 1 - Short Title
This clause provides that the Bill, when enacted, may be cited as the Private Health
Insurance Legislation Amendment Act 2008 (PHILA Act).
Clause 2 - Commencement
This clause provides that the Bill will commence on the day on which the PHILA Act
receives the Royal Assent.
Clause 3 - Schedule(s)
This clause provides that each Act that is specified in a Schedule to this Bill is amended or
repealed as set out in the applicable items in the Schedule concerned, and any other item has
effect according to its terms.
Schedule 1 - Health-related business
Australian Securities and Investments Commission Act 2001
Item 1 Paragraph 12BAA(7)(d)
Item 1 repeals the current paragraph 12BAA(7)(d) of the ASIC Act and substitutes it with a
new paragraph specifying that health insurance provided as part of a health insurance
business or a health-related business that are conducted through a health benefits fund is
excluded from being considered a contract of insurance and, therefore, is not a financial
product for the purposes of Division 2 of Part 2 of that Act. Health insurance business is
defined in section 121-1 and health-related business is defined in section 131-15 of the
Private Health Insurance Act 2007.
Item 2 After paragraph 12BAA(8)(b)
Item 2 inserts a new paragraph 12BAA(8)(ba) into the ASIC Act specifying that insurance
provided as part of a health-related business that is conducted through a health benefits fund
is not a financial product for the purposes of Division 2 of Part 2 of that Act.
Corporations Act 2001
Item 3 After paragraph 765A(1)(c)
Item 3 inserts a new paragraph 765A(1)(ca) into the Corporations Act specifying that
insurance provided as part of a health-related business that is conducted through a health
benefits fund is not a financial product for the purposes of Chapter 7 of that Act.
Insurance Act 1973
Item 4 Subsection 3(1) (after paragraph (j) of the definition of insurance business)
Item 4 adds a paragraph (ja) into subsection 3(1) of the Insurance Act specifying that the
meaning of insurance business for the purposes of the Private Health Insurance Act 2007
(the Act) does not include health-related business carried on by a private health insurer
through a health benefits fund.
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Insurance Contracts Act 1984
Item 5 After paragraph 9(1)(b)
Item 5 inserts a new paragraph 9(1)(ba) into the Insurance Contracts Act specifying that that
Act does not apply to or in relation to contracts of insurance entered into, or proposed to be
entered into, by a private health insurer in respect of its health-related business that is
conducted through a health benefits fund.
Schedule 2 - Restricted Access Insurers
Private Health Insurance Act 2007
Item 1 Subsection 55-5(3)
Item 1 inserts the words "or *rules" after the word "constitution" in subsection 55-5(3) of the
Act to specify that discrimination by a restricted access insurer is not improper discrimination
to the extent that the restricted access insurer ensures that its complying health insurance
products are not made available to persons to whom its constitution or rules prohibit it from
making the products available.
Item 2 Subsection 126-20(6)
Item 2 inserts the words "or *rules" after the word "constitution" in subsection 126-20(6) of
the Act in order to allow a restricted access insurer to include the statements described in
paragraphs (a), (b) and (c) of subsection 126-20(6) of that Act in its constitution or rules in
order to be registered as a private health insurer.
Item 3 Paragraph 185-5(e)
Item 3 inserts the words "or *rules" after the word "constitution" in paragraph 185-5(e) of the
Act to specify that the requirement to include a provision in the constitution or rules to
comply with subsection 126-20(6) of the Act is an enforceable obligation.
Item 4 Paragraphs 200-1(1)(e) and (2)(e)
Item 4 inserts the words "or *rules" after the word "constitution" in paragraphs 200-1(1)(e)
and 200-1(2)(e) of the Act to specify that the Minister or the Private Health Insurance
Administration Council (Council) may give a direction to a restricted access insurer to
modify the provisions included in its constitution or its rules in order to comply with
subsection 126-20(6) of the Act.
Schedule 3 - The requirement for private health insurers to be companies
Part 1 - Amendments
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Private Health Insurance Act 2007
Item 1 Paragraph 126-10(1)(a)
Item 1 omits the words "or a registered body within the meaning of that Act" from paragraph
126-10(1)(a) of the Act so that a body must be a company within the meaning of the
Corporations Act to apply for registration as a private health insurer.
Item 2 At the end of subsection 126-45(1)
Item 2 adds a new paragraph (c) at the end of subsection 126-45(1) of the Act specifying that
the Council must cancel the registration of a private health insurer if the insurer is not a
company within the meaning of the Corporations Act on or after 1 January 2010.
Part 2 - Transitional provisions
Item 3 Applications for registration for which decisions are pending
Item 3 provides that an application for registration as a private health insurer made before the
commencement of this item by a body that is not a company within the meaning of the
Corporations Act, and which has not yet been decided by the Council under section 126-20 of
the Act, will not be a valid application under section 126-10 of the Act.
Item 4 Exemption from stamp duty etc. relating to certain private health insurers
becoming companies
Item 4 protects bodies from the imposition of stamp duty, or any other tax, otherwise
imposed under a law of a State of Territory, in respect of a thing done for the purpose of
registering a body as a company if:
a) it is done after the commencement of this item and before 1 January 2010; and
b) at the time the body is a private health insurer; and
c) the registration of the body as a company was done solely for the purpose of avoiding
the body's registration as a private health insurer being cancelled under paragraph
126-45(1)(c) of the Act.
Also, (2) in this item defines the meaning of company and private health insurer for the
purposes of the item.
Schedule 4 - Corporate products
Private Health Insurance Act 2007
Item 1 At the end of section 55-5
Item 1 adds a new subsection (4) at the end of section 55-5 of the Act to specify that, despite
subsection 55-5(2) of the Act, a private health insurer who discriminates on the basis of
employment does not improperly discriminate to the extent that the effect of the
discrimination is that the premiums payable under an insurance policy are discounted
(providing that the premiums meet the requirements in section 66-5 of the Act).
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Item 1 also adds a new subsection (5) at the end of section 55-5 of the Act to clarify that the
discrimination described in new subsection 55-5(4) is improper discrimination if the insurer
directly or indirectly causes the insurance policy to be cancelled for the reason that a person
ceases to be employed by, or under contract to provide services to, a particular employer.
Schedule 5 - Pilot projects
Private Health Insurance Act 2007
Item 1 At the end of Division 55
Item 1 adds a new section 55-15 at the end of Division 55 of the Act specifying that the
principle of community rating in section 55-5 is not breached if a private health insurer
discriminates for the purpose of conducting a pilot project in accordance with the Private
Health Insurance (Complying Product) Rules.
Item 1 also adds a new subsection 55-15(2) to the Act providing that Private Health
Insurance (Complying Product) Rules can be made to permit pilot projects of a kind specified
in the Private Health Insurance (Complying Product) Rules to be conducted by private health
insurers in accordance with the requirements specified in the Private Health Insurance
(Complying Product) Rules.
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