The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 has been passed by both Houses of Parliament.
UPDATE: Royal Assent given on 22 February 2017.
The Bill aims to improve the quality of advice in the sale of life insurance by removing the current life insurance risk product exemptions from the FoFA conflicted remuneration ban, including new more limited exemptions and limiting the amount of upfront commissions that financial advice providers may accept and retain.
The following changes will commence on 1 January 2018 :
- upfront commissions paid to advisers will be phased down over two years from 1 January 2018 from a maximum of 80 per cent to a maximum of 60% from 1 January 2020;
- a 20% cap for trail commissions from 1 January 2018; and
- commencement of a two year commission ‘clawback’ period on 1 January 2018 for policy lapses, which requires clawbacks of 100% of an upfront commission in the first year and 60% of an upfront commission in the second year.
A Life Insurance Code of Conduct has been developed by the life insurance industry. The Code sets out best practice standards for insurers, including in relation to underwriting and claims management.