ASIC today released a consultation paper seeking feedback on proposals to implement reforms to the regulation of the life insurance industry.
On 3 December 2015, the Government released draft legislative amendments and explanatory material containing proposed amendments to the Corporations Act 2001 (Corporations Act) to remove the exemption from the conflicted remuneration provisions for life insurance advice, and to allow benefits to be paid to advisers if requirements imposed by ASIC are met.
The draft legislative amendments give ASIC power to make a legislative instrument to set out:
- a maximum level of upfront and ongoing commission payments permitted in relation to life insurance products, and
- the amount of upfront commissions to be repaid to life insurers (‘clawback’).
This consultation paper seeks feedback on the policy we propose to give effect to in the instrument.
ASIC is also seeking feedback on the type of information that life insurers should report to us to enable us to monitor the effect of the reforms and assist us to understand developments in the life insurance sector.
ASIC requests comments on its consultation paper by Friday, 29 January 2015.
Background
In April 2014 ASIC published Report 413 Review of retail life insurance (REP 413) (refer: 14-263MR) which set out the findings of a major review of life insurance advice. ASIC found that there was an unacceptably high level of non-compliant life insurance advice. REP 413 was followed by the Financial System Inquiry (FSI) final report and the industry-commissioned Review of retail life insurance advice (March 2015) (the Trowbridge Report), both of which recommended reform to the regulation of life insurance advice. The Government then called on industry to develop a solution that would improve the quality of advice and provide better consumer outcomes.
Industry developed a set of reform proposals, which included caps on commissions and clawback arrangements.
On 6 November 2015, the Minister for Small Business and Assistant Treasurer, the Hon Kelly O’Dwyer, announced a proposed industry package of reforms, which are scheduled to commence on 1 July 2016. Find out more about the key elements of the package.