Australia - Life Insurance Remuneration Reform Regulations.
Legal News & Analysis – Asia Pacific - Australia – Insurance & Reinsurance
7 April, 2016
Government Exposure Draft
WHAT YOU NEED TO KNOW
- Today the Government has released draft regulations that will support the Government's life insurance reform package to better align the interests of consumers and financial firms.
- Importantly, the reform package introduced by the Life Act removes the exemption from the ban on conflicted remuneration, and introduces caps under which commissions will be permitted to be paid, as well as arrangements to ‘clawback’ commissions where policies lapse in the first two years. The reforms will commence on 1 July 2016.
- The instrument is proposed to be made under the Corporation Act 2001. The amendments are proposed to be made to the Corporations Regulations 2001 and will:
- allow the temporary inclusion of stamp duty relating to death benefits to be included in commission calculations while industry updates its information technology systems;
- prescribe circumstances where ‘clawback’ does not apply, such as in situations where a policy is cancelled automatically due to the age of the insured or where a premium rebate is offered to encourage customers to take up a policy; and
- ensure that existing life insurance remuneration arrangements are grandfathered in a manner broadly consistent with FOFA by ensuring that remuneration arrangements not effectively grandfathered by the Life Act (i.e. employee-employer remuneration arrangements) are explicitly grandfathered in the Regulation. Grandfathering means that the existing rules continue to apply to existing arrangements, while new rules apply to new arrangements.
WHAT YOU NEED TO DO
- Interested parties are invited to comment on the consultation papers by Thursday 28th April 2016.
- The consultation papers and further details are available at http://www.treasury.gov.au/ConsultationsandReviews/
- Consultations/2016/Life-insurance- remuneration-reform-regulations
For further information, please contact: