The Australian Securities and Investments Commission has signalled it is prepared to wait until after its review of the Life Insurance Framework in 2021 before pressing for the removal of commissions-based remuneration in the life/risk sector.
In a submission filed with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the regulator has expressed its ongoing concern about the impact of commissions, but indicated its willingness to allow the LIF implementation to run its course.
It said that since its initial report on the issue, poor quality advice on life insurance has continued but “that the limitations on life insurance commission have, however, only been in effect since 1 January 2018”.
“ASIC will conduct a post-implementation review in 2021 to assess the impact of the reforms,” it said. “Collection of data to inform this review has commenced.”
“ASIC considers that if no significant improvement has been made on the findings reported in ASIC REP 413, there would be a compelling case to remove the exemption from the ban on conflicted remuneration currently afforded to the sale of life insurance products altogether”.
“As a preliminary observation and noting that ASIC’s review is due only in 2021, in ASIC REP 587 ASIC observed a link between incentive schemes and conduct at point of sale,” the ASIC submission said. “With one exception, those firms with the incentive schemes that had the most significant conflicts of interest were also the firms who engaged in pressure selling and other practices where a sale was prioritised ahead of the needs of the consumer. Findings of this kind suggest that the ban on conflicted remuneration should be applied to life insurance products.”