The possibility of a total ban on life insurance commissions across the Tasman has edged a step closer this week with the release of the recommendations stemming from the Australian Banking Royal Commission.
Included in the 76 recommendations made in the final report into Misconduct in the Australian Banking, Superannuation and Financial Services Industry is a recommendation that, in respect to the current life insurance remuneration reforms being implemented by Aussie regulator, ASIC, as part of the Government’s Life Insurance Framework reforms:
“ASIC should consider further reducing the cap on commissions in respect of life risk insurance products.”
The recommendation continued:
“Unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero.”
In a press conference following the public release of the Royal Commission recommendations, the Australian Treasurer, Josh Frydenberg, indicated his Government will be taking action on all 76 of the recommendations contained in the final report, including ending all grandfathered commissions by 1 January 2021.
The Treasurer also indicated that ‘hawking’ for the sale of both superannuation and insurance products will be prohibited in future.
The exact wording of the recommendation regarding the future of life insurance commissions, contained in the three-volume, 496-page final report reads:
Recommendation 2.5 – Life risk insurance commissions
When ASIC conducts its review of conflicted remuneration relating to life risk insurance products and the operation of the ASIC Corporations (Life Insurance Commissions) Instrument 2017/510, ASIC should consider further reducing the cap on commissions in respect of life risk insurance products. Unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero.
Click here to access the Final Report into Misconduct in the Australian Banking, Superannuation and Financial Services Industry.