FPA seeks LIF grace period

The Financial Planning Association (FPA) has urged that a "grace period" be applied to the transitionary arrangements towards the new Life Insurance Framework.

In a submission responding to an Australian Securities and Investments Commission (ASIC) consultation paper on the LIF changes, the FPA has pointed to the delay which can occur between the time a planner submits a policy application on behalf of a client and the time it is approved.

"While an insurance contract may be written and signed by a consumer today, there is often a delay before an insurer reviews, underwrites and issues the policy," the FPA submission said.

"We therefore recommend that a grace period – for example three months – be included within the legislative instrument so that policies submitted with the insurer prior to 1 July each year during the transition period and issued within a reasonable period of time do not unintentionally get affected by the limits on maximum upfront commissions."

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The FPA said this would ensure that the agreed fee structure and quantum which had been entered into with customers was honoured.

"We therefore propose ASIC include a grace period for pre-1 July applications to be accepted at the maximum upfront commission level for the financial year they were submitted rather than the financial year they have been paid where the policy is implemented within an appropriate period of time," the submission said.

The FPA submission has also sought clarity from the regulator around a range of procedural and technical issues including business transfers and professional fees collected by insurers.