The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 has been introduced into the House of Representatives. The Bill changes life insurance commission arrangements by removing the current exemption in the Corporations Act from the ban on conflicted remuneration for benefits paid in relation to certain life risk insurance products. (Background).

Benefits paid in relation to life risk insurance products (including commissions and volume-based payments) will be subject to the ban on conflicted remuneration, unless they satisfy the criteria in an ASIC instrument. There will be a transitional period of three years.

The Bill enables ASIC to make a legislative instrument to permit benefits in relation to life risk insurance products to be paid, provided certain requirements are met. These requirements relate to the quantum of allowable commissions and to ‘clawback’ arrangements, where a certain portion of the upfront commission is paid back to the life insurer by the financial adviser in the event that the life insurance policy is cancelled or the premium is reduced.

The Bill introduces a ban on volume based payments in life risk products and includes transitional (grandfathering) arrangements in the Corporations Act.

ASIC will review the new arrangements in 2018.

The amendments will take effect from 1 July 2016 or the day after Royal Assent, whichever is the later.

The Bill will be referred to the Senate Economics Committee.