ASIC will be given new powers to set caps on commissions
and enable "clawbacks" of commissions paid under planned
amendments to the Corporations Act following new reforms
announced by the Federal Government. These reforms represent
the Government's response to recommendation 24 of the
Financial System Inquiry1 and also to an
industry-led law reform package released in June this year on which
With threats of further reform and ASIC inquiries, the Federal
Government has announced significant reforms to the retail life
insurance industry. Commencing 1 July 2016 upfront commissions
received for personal and general advice (including direct sales
channels) will be capped as follows:
80 per cent from 1 July 2016;
70 per cent from 1 July 2017; and
60 per cent from 1 July 2018, together with a maximum 20 per
cent ongoing commission.
In addition, the Government will introduce a two year clawback
for commissions received under a life insurance policy, applying as
in the first year of the policy, to 100 per cent of the
commission on the first year's premium; and
in the second year of the policy, to 60 per cent of the
commission on the first year's premium.
Draft legislation to implement the commission-caps and clawback
will be released for consultation by the "end of 2015"
before being introduced into Parliament in the new year. However,
these are not the only reforms likely to affect the industry in the
near future. After this first wave of reform, ASIC will:
investigate compliance with remuneration disclosure as part of
a broader review of Statements of Advice. This will occur in the
second half of 2016; and
review of the effectiveness of the commission-cap and clawback
reforms in 2018. If that review does not identify significant
improvement, the Government intends to follow the recommendations
of the Murray Inquiry by mandating level commissions.
Finally, the Government intends that industry will also bear
some of the reform burden. The FSC has been tasked with developing
a Life Insurance Code of Practice, which will set out best practice
standards for insurers, including in relation to underwriting and
claims management. The code will be similar to existing codes for
Banking and General Insurance. In addition, while no precise
details have been provided, the Government has flagged a widening
Approved Product Lists through the development of a new industry
If you would like to make a submission to the legislative
consultation when announced, or would like to prepare for
ASIC's review of Statements of Advice, please contact a member
of our team.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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