Financial advisers who provide personal advice to retail clients in relation to insurance products often receive commissions from product issuers, creating an inherent conflict with the adviser's duty to act in the best interests of their client.
New provisions have introduced requirements for advisers to obtain informed consent before accepting commissions which take effect on 10 July 2025.
Who do the changes apply to?
The consent requirements in relation to insurance commissions apply to advisers who:
- provide personal advice to retail clients about:
- a life risk insurance product,
- general insurance product, or
- consumer credit insurance product; and
- receive a commission in connection with the sale or issue of that product.
In these circumstances, the adviser must obtain the client's informed consent before accepting the commission. If the client does not provide consent to the commission, the adviser can agree to provide the advice for a fee paid by the client, or the adviser can decline to provide the advice. Otherwise, the adviser will be in breach of the conflicted remuneration rules.
The issuer of the insurance product does not contravene conflicted remuneration rules and is not liable for ensuring or checking that the licensee or authorised representative has received informed consent from the client.
What is informed consent?
The adviser must disclose to the client the following information (whether in a Statement of Advice or another format):
- The name of the insurer of the relevant product;
- The rate of the commission to be received, expressed as a percentage range of the policy cost for the product (a specific dollar amount does not need to be specified);
- The frequency with which the commission will be received and the period for which the commission will be received (including any renewals);
- The nature of any services that the licensee or authorised representative will provide to the client in relation to the relevant product;
- A statement that it is a requirement of the law that client consent must be obtained before payment of an insurance commission; and
- The fact that the consent is irrevocable.
Consent does not need to be obtained every time the client's cover is renewed for:
- general insurance products – if the original consent states that the client's consent will cover renewals of that product;
- life risk insurance products and consumer credit insurance products – if the original consent specifies that the client's consent covers the expected renewal period(s).
However, if the rate or frequency of the commission to be received has increased, the adviser must disclose this change to the client and obtain their consent again. If the client does not consent to the variation, the original consent will continue to apply.
Although there is no prescribed form for consent, the licensee or authorised representative must ensure they have a written record of the client's consent (and any consent to variations) and provide the record of the consent to the client as soon as reasonably practicable after the consent is obtained (for example, an email recording a conversation where the consent was discussed is sufficient).
When a licensee or authorised representative transfers their insurance business to other licensees or authorised representatives, the client's consent will continue in effect.
If you have any questions about the changes implemented by the DBFO Act, please contact us.
Further Reading
- An overview of the DBFO Package (Tranche 1)
- RG246 – Conflicted and Other Banned Remuneration
- ASIC Info Sheet 292 – FAQs: Informed Consents for Insurance Commissions
- Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.