Royal Commission Will Consider Life Insurance Remuneration


The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will consider whether life insurance commissions should be exempt from the ban on conflicted remuneration, despite the issue not being raised during hearings.

Counsel Assisting the Commission, Rowena Orr, QC

In closing remarks made to the Commission at the end of two weeks of hearings into the financial advice sector Senior Counsel Assisting the Commission, Rowena Orr QC invited parties that had leave to appear at the Commission to make submissions on a range of topics including the management of conflicts of interest and the ban on conflicted remuneration.

Orr said at the start of the two week block of hearings, which ended last week, the Commission was provided with a number of statements that dealt with these issues and parties that were to provide written submissions should address a number of questions based on those statements.

“…should the statutory carve-outs to the ban on remuneration, including…insurance commissions, be maintained…”

On the matter of life insurance, Orr said the question to be addressed was “…should the statutory carve-outs to the ban on remuneration, including the recent carve-out in relation to insurance commissions, be maintained”, adding “If so, why?”

The issue of vertical integration was also addressed with parties making submissions asked to address whether financial advisers can manage conflicts of interest associated with providing advice as a representative of an institution that also manufactures financial products.

Orr also called for parties to comment on the regulatory and disciplinary regime of financial advisers asking if the current system was sufficient to prevent misconduct or if there were gaps between the oversight provided by regulators and licensees.

Additionally, Orr asked if a system of licensing at both an individual and an entity level be more appropriate than the existing system of licensing only at the entity level.

Commissioner Kenneth Hayne said the submissions were to be limited to 35 pages and received by the Commission by 4pm on 7 May. He also invited written responses of between 20 to 30 pages from AMP, CBA, NAB, Westpac, ANZ (see: AMP, Banks May Face Criminal Charges Over Advice Failings) and Henderson Maxwell regarding the case studies heard by the Commission during the course of the hearings (see: Award Winning Practice May Face Criminal Charges).


  1. Rowena Orr, QC, asks should the carve out of a ban on commissions for Insurance be maintained and if so, why?

    The answer is simple and does not need 35 pages to point out the obvious.

    Commissions on Insurance MUST be maintained, or the Retail Life Industry ceases to exist.

    The heat needs to be turned back on these people who think otherwise.

    Questions like, what Government guarantees will be put in place to compensate the Tens of thousands of jobs that will be lost when the advisers, who will lose their Businesses, lay off staff and the millions of Australians who will no longer have representation when the Retail Life Industry collapses through the fault of ill thought out ideas with NIL credibility, is pushed through by uninformed politicians.

    There will be the largest collapse in the history of Australia and the largest class action against the Government for knowingly destroying a centuries old Industry, as the evidence has been front and centre right from the start and was the reason why commissions were maintained in the first place.

    Any move to disallow commissions now, will be suicide, as clear evidence is in full view and will be used against any entity, including the Government who attempts to destroy our livelihoods for no positive outcome for all Australians.

    The Life Companies were willing participants in the whole LIF fiasco and will also be caught up in the class action if they continue with their strategy of strangling Life advisers out of the Business.

    The solution has always been in front of the Government and the Life Companies and they will suffer the consequences if they continue playing games.

    • The retail life industry will not cease to exist. The life risk *advice* industry will more than likely cease to exist.

      I sympathize with you and I agree with you on the harm to Australians. Risk advisers clearly provide an important benefit to Australians, especially at claim time.

      If government removes the exemptions to the conflicted remuneration ban, the government will not compensate anyone. They have not compensated anyone for the non-exempted conflicted remuneration ban so far.

      There will be no class action. The parliament can legally introduce legislation that bans all remaining conflicted commissions (i.e. remove the exemptions to the conflicted remuneration ban that presently allows for commissions on retail life insurance to remain).

      Governments have been destroying industries since industry began. Passing legislation to remove import tariffs destroyed many Australian industries. Removing taxpayer subsidies destroyed the car manufacturing industry in Australia. For right or wrong, there were arguable justifications given for doing both of these.

      In so legislating, the parliament is not compulsorily acquiring property and so s51(xxxi) of the Constitution is of no help here.

      The government that does this will suffer no consequences. Banning commissions and destroying the life risk advice industry will never be an election issue in a country where most people don’t know what parliament is, that they are paying for insurance in their super, what TPD means or why insuring their ability to earn an income is so much more important than insuring their car.

      It will be even easier for government as the education requirements result in a shrinking in the number of life risk advisers. Older advisers will retire and nobody will want to do a 3 year degree to sell something that requires so much compliance and compliance risk and cost for so little in return.

      LIF and FOFA happened. Government did it. Nobody outside the industry and government had any idea that it happened, what it was or what it meant.

      The life companies will sell rubbish to Australians and the latter will suffer at claim time.

      Disallowing commissions won’t be suicide it will be legislated murder.

      Most Australians wouldn’t know how to spell “conflicted remuneration” let alone know what it meant.

  2. We have self interested lawyers making the rules for the insurance industry. Lawyers want to get rid of Risk Advisers so that clients will be forced to go direct to the insurers and get Junk policies from the likes of Real Insurance. Then when the Junk Insurance provider puts all these barriers up at claim time and refuses to pay, the client will have no choice but to hire a lawyer to handle their claim for them for a small 30% fee.

    Unfortunately i see all these self interests groups deliberately trying to get rid of the only people who actually ever worked in the clients’ best interest so they can make more money themselves.

    Commissions will probably disappear. Risk advice will cease

    Buy Maurice Blackburn shares. Warning…General Advice only

    • Jake, I think you are being too nice. A 30% fee doesnt cut it for the lawyers. We have been asked to look at a claim for a new client where they were charged $68k for a $96k claim. Client ended up with $28,000. The schedule of “likely” fees suggested a range of $20 to $30k.

      • Its an absolute joke that lawyers have no best interests duty to their clients.

        Ive seen a similar case where the lawyer handling the TPD claim made a client sign a declaration that the lawyers fee (of $35k) would be paid if the lawyer won some compensation from the insurer. The TPD benefit amount was over $500k and with an adviser handling this it would have been paid in full, however the lawyer and the insurance company teamed up and the lawyer got the insurer to settle for just over $60,000 and the client had no choice to accept this figure and pay the lawyer.

        The lawyer did no work, he got his assistant to hand in the claim forms and when the claims people put up some barriers that lawyer took the easy option and settled, without going to an internal review, without going to FOS first.

  3. How is it that I can arrange insurance for clients with better policy definitions, that is individually underwritten so that there’s no surprises for the client at claim time and still get paid via a commission structure that almost all clients prefer AND that is lower priced than the alternative via an Industry Super Fund group insurance policy, and we are the one’s being investigated??

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