The Government has released the draft Corporations Amendment (Life Insurance Remuneration Arrangements) Regulation 2016 (the Regulation) which will compliment the Corporations Amendment (Life Insurance Remuneration Arrangements) Act 2016 (the Life Act) to regulate the permissible remuneration arrangements relating to life insurance.

The Life Act will remove the life insurance commission exemption from the ban on conflicted remuneration, and introduce 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. Download the Parliamentary Library Bill Digest.

Provided the Senate passes the Life Act at its sittings commencing on 18 April 2016, the reforms will commence on 1 July 2016. Background

UPDATE 18 May 2016: The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 has been passed by the House of Representatives but lapsed in the Senate as it was not passed before the election was called. As it will need to be re-introduced after the 2016 election on 2 July the commencement date of 1 July 2016 will be delayed.

The regulations:

• provide a 12 month transition period during which stamp duty relating to death benefits may be included in the calculation of commissions, while industry makes necessary system changes to exclude it in the future;
• prescribe certain limited circumstances under which ‘clawback’ arrangements are not intended to apply, such as in the case of self-harm by the insured, or where a premium is reduced due a decision by the insured to quit smoking; and
• provide for the grandfathering of existing employee-employer remuneration arrangements in a manner broadly consistent with that under the Future of Financial Advice reforms.