Life insurer shelf space fees legal, for now
Shelf space fees being charged by advice licensees to life insurers to place their products on an Approved Product List (APL) remain legal, for now, according to the Australian Securities and Investments Commission (ASIC).
Answering questions on notice stemming from the Parliamentary Joint Committee on Corporations and Financial Services, the regulator said that while volume-based shelf space fees paid to platform operators had been banned, “other shelf space fees are not specifically banned under the Act”.
“Therefore, shelf-space fees that advice licensees charge life insurers to place their products on the advice licensee's Approved Product Lists will only be banned if they: 1. satisfy the test of 'conflicted remuneration' in s 963A of the Act and 2. are not covered by an exemption in s963B of the Act,” ASIC said.
“Currently, these shelf-space fees would not be conflicted remuneration because of the exemption for monetary benefits relating to life risk insurance products,” it said.
However, it said that from 1 January 2018, these benefits will not be exempt because they are unlikely to satisfy the commission caps under the amended exemption.
“Shelf-space fees charged by licensees to life insurers will then need to be assessed under the test for conflicted remuneration in s963A. Whether a shelf-space fee will be conflicted remuneration will depend on the circumstances in each case.”
ASIC said relevant circumstances would include the size of the fee; how the fee is calculated (e.g. is it linked to sale of the insurer’s products); how the licensee uses the fee; whether the fee is passed onto advisers, and in what form; and, how the insurer’s products are presented on the APL and to the advisers (e.g. are they presented as ‘preferred products’ in any way).
ASIC said it had not conducted reviews of these types of shelf-space fees and therefore it was not in a position to provide a view on whether, generally, the fees are conflicted remuneration.
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