The head of Australia’s corporate regulator ASIC has claimed a recent speech in which he called for the removal of commissions to avoid conflicts of interest was not intended to include life insurance commissions and there was no plan to remove them.
The clarification was made by ASIC Chair, James Shipton before a hearing of the Senate Economic Legislation Committee last week in Canberra after Senator John Williams said the comments ran counter to ASIC’s role in enforcing the Life Insurance Framework.
Williams referred to Shipton’s speech of 17 May in which he stated “…the best way to deal with some conflicts was not to manage or disclose them, but to remove them altogether. This is an option that ASIC favours in relation to conflicted payments and advice” (see: Removal of Commissions Would End Conflicts of Interest).
Williams said the recent changes around life insurance commissions had started with ASIC Report 413 in 2014 and had ended with caps and clawbacks on commissions from 1 January 2018, administered under a legislative instrument overseen by ASIC.
“Given your speech and the context of your published statement, do you no longer support your own legislative instrument on life insurance commission caps?” Williams said.
“…there’s no plan for changing the process that was put in place for commissions for life insurance?”
In his reply, Shipton said his comments about conflicted payments and advice were related to financial advice but were not applicable to life insurance.
Shipton said, in his speech, he “…went on to also use that as an example or a benchmark to show that, when talking about the broader issue of conflicts of interest, particularly in remuneration, eradication of conflicted payments is one option”.
“I wouldn’t go on and then extrapolate that our policies in relation to other areas like life insurance are a direct consequence,” he added.
Seeking further clarification Williams said, “So there’s no plan for changing the process that was put in place for commissions for life insurance? The other commissions for advice have gone?”.
To this Shipton replied only with “Correct” and then concluded his statement by adding the speech called on the financial services sector to have a wholesale review of practices in relation to conflicts of interest, particularly those related to remuneration structures, to deal with conflicts of interest which ASIC considered were more prevalent than they should be.