Licensees stand to be significantly adversely impacted by the claw-back provisions within the new Life Insurance Framework, particularly when advisers opt to change dealer groups, according to specialist lawyer, Ian McDermott.
Commenting on Money Management reports about the degree of life/risk adviser concern about the claw-back provisions, McDermott said he believed licensees stood to be just as impacted as their authorised representatives.
McDermott said that, typically, advisers could only deal with insurers if their licensee had a distribution or other promotional-type agreement in place with an insurer.
"Payments are typically made to the licensee, who then forwards the amount (or a percentage thereof) to the adviser. So, licensees will be required to provide any refund of commissions to the insurer and then claw-back from the adviser," he said.
However, McDermott said problems were likely to arise where an adviser moved on from the licensee between the time of writing the business and the client cancelling the policy.
"Licensees will have to rely on indemnities and express claw-back provisions in their AR agreements," he said.
"But in my experience, some of these AR agreements lack the requisite powers. And then there is the problem of enforcement."
"There is a chance some licensees will be left carrying the can," McDermott said.