It will be years before the Australian Securities and Investments Commission (ASIC) will know whether its changes to life insurance remuneration have actually been effective.
But it has signalled to a Parliamentary Committee that the major insurers providing life insurance via direct channels are now under scrutiny including the possibility that some of their business models could breach regulatory requirements.
ASIC has used documentation provided to the Parliamentary Joint Committee on Corporations and Financial Services review into the life insurance industry to acknowledge that because the Life Insurance Remuneration Act does not commence until 1 January 2018 it will not be able to determine whether the changes are “effective in achieving the objective of better aligning the interests of consumers with those selling the life insurance for a number of years”.
“The Government has asked ASIC to conduct a review of the reforms in 2021. We will be collecting data and conducting surveillances on advice, and have a current project on sales of life insurance through the direct channel – all this work will assist in establishing whether the reforms have been effective in achieving their objective,” the regulator said.
“Different models of distributing life insurance exist, especially in the direct channel, and we are continuing to assess different types of distribution methods through ASIC's current work on direct sales of life insurance,” it said.
ASIC said that as it worked through the information it was receiving about different models of distribution, it believed it might find models that came within the reforms, some that were not captured, “and some models that seek to circumvent the reforms”.
“As yet, we do not have enough information to make an assessment. We will continue to monitor the industry, and consider what, if any, action might be appropriate if we identify any issues,” the regulator said.