{"id":31879,"date":"2015-12-08T20:43:53","date_gmt":"2015-12-08T10:43:53","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=31879"},"modified":"2015-12-09T07:42:23","modified_gmt":"2015-12-08T21:42:23","slug":"lif-legislation-shows-asic-will-shape-future-of-commissions","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2015\/12\/08\/lif-legislation-shows-asic-will-shape-future-of-commissions\/","title":{"rendered":"LIF Outcomes to be Decided in 2018 ASIC Review"},"content":{"rendered":"

While the life insurance sector has been given three years to transition to the Life Insurance Framework (LIF), it may only have the next two years in which to demonstrate the reforms are actually reducing churn-related behaviour.<\/p>\n

\"Assistant<\/a>
Assistant Treasurer, Kelly O’Dwyer<\/figcaption><\/figure>\n

According to recent statements made by Assistant Treasurer, Kelly O\u2019Dwyer<\/strong>, the Government will determine its position on the future of adviser remuneration in 2018, a full year before the end of the LIF transition period, when it conducts a review into the impact of the reforms.<\/p>\n

This review will be informed by reporting the Government will receive from the Australian Securities and Investments Commission (ASIC) on trends in life policy lapses and retention levels following the commencement of the transition period from 1 July 2016.<\/p>\n

In releasing the draft legislation on 3 December, O\u2019Dwyer stated that \u201cASIC will undertake a review of the reforms in 2018 and that if this review does not identify significant improvement the Government will move to mandate level commissions, as recommended in the Murray Inquiry report\u201d.<\/p>\n

These comments are consistent with those made during the Government\u2019s response to the Financial System Inquiry <\/a>in late October and when announcing the reduction of clawback from three-years to two-years<\/a> in early November, and are also included in the Explanatory Memorandum to the Draft Legislation.<\/p>\n

ASIC to Control Commission Flows<\/strong><\/p>\n

An examination of the Explanatory Memorandum to the draft legislation indicates that ASIC will not only have a role in reviewing the sector but in controlling the flow of upfront, ongoing and level commissions to advisers.<\/p>\n

This will happen as the LIF legislation – titled the\u00a0Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2015<\/em>\u00a0– will effectively remove the exemption to the ban on conflicted remuneration for benefits paid in relation to certain life risk insurance products, that is commissions and volume based payments.<\/p>\n

At the same time the Bill will amend the Corporations Act 2001<\/em> to give ASIC the power to specify, via a legislative instrument:<\/p>\n