Australia’s two largest accounting bodies have called on the Accounting Professional and Ethical Standards Board (APES Board) to rethink its proposed ban on insurance commissions.
Earlier this year, the APES Board issued draft guidelines for accountants who provide financial advice services, known as APES 230. The guidelines included a proposal to ban commissions as a form of remuneration for all forms of financial advice, including that relating to life insurance products (see: Risk Commissions to be Banned Under New Accounting Standards).
The Institute of Chartered Accountants Australia (ICAA) and CPA Australia have issued a joint response to the proposed Standard, making ten separate recommendations to the APES Board, including a call for insurance commissions to remain.
The recommendation proposes that:
Members are not banned from receiving commissions on insurance but are required to use the conceptual framework of the Code to identify, evaluate and address any threats created. To address perceived or potential conflicts of interest created by commissions the accounting profession works with the industry to develop and implement additional safeguards, such as:
- Disclosure of at least three comparative quotes when a recommendation is made
- Duty of disclosure around changing of insurers within certain timeframe of policy period; and
- A mandated summary (short-form) disclosure statement of advice and fees.
According to the ICAA and CPA, the new best interests duty and related Future of Financial Advice (FoFA) provisions, together with the additional safeguards listed above, provide sufficient protection for consumers from the perceived conflict of interests that may arise from commissions. Furthermore, the peak industry bodies cite the difficulty for individual accounting practices to comply with the Standard, since commissions will remain the preferred remuneration model for the life insurance industry following the FoFA announcements earlier in the year.
In order to incorporate the recommended changes, the ICAA and CPA have also asked the APES Board to delay the commencement of the Standard until 1 July 2014, with a final review on 1 July 2017, once the impacts of FoFA are better known and understood.
An APES Board meeting is scheduled for Friday, 16 November, with the published agenda indicating that the APES 230 Standard will be discussed.
