February 4, 2019
The Banking Royal Commission has cast a giant shadow over the long-term future of life insurance commissions.
Included in the 76 recommendations made in the final report into Misconduct in the Banking, Superannuation and Financial Services Industry submitted by Commissioner Hayne, the Commissioner has recommended that, in respect to the current life insurance remuneration reforms being implemented by ASIC as part of the Life Insurance Framework reforms:
“ASIC should consider further reducing the cap on commissions in respect of life risk insurance products.”
The Commissioner 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, Treasurer, Josh Frydenberg, has indicated the Government will be taking action on all 76 of Commissioner Hayne’s recommendations, 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.
Riskinfo will provide more detailed updates and report industry reaction to the 76 recommendations in the three-volume, 496-page final report.
Recommendation 2.5 reads in full:
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 Banking, Superannuation and Financial Services Industry.