Following on from our previous update regarding the new life insurance remuneration arrangements, the Corporations Amendment (Life Insurance Remuneration Arrangements) Regulations 2017 (Regulations) have now been passed.
The Regulations will take effect from 1 January 2018, the same date as the Corporations Amendment (Life Insurance Remuneration Arrangements) Act 2017 (Act).
The Act removed the exemption for life risk insurance products whereby a benefit is not conflicted remuneration if no financial advice in relation to the product has been given to the person in the last 12 months. This was purposely done to allow the Regulations to prescribe circumstances in which benefits in relation to life insurance are conflicted remuneration even where the circumstances do not involve the provision of financial product advice.
The Regulations provide that a benefit given to a financial services licensee, or representative of a financial services licensee, will be conflicted remuneration, where no financial product advice is given, if the benefit relates to:
- information given to a person in relation to a life risk insurance product; or
- a dealing in a life risk insurance product with a person as a retail client,
and access to, or value of, the benefit is dependent on the value or number of the life risk insurance product(s) subsequently acquired or varied.
However, these benefits will not be considered conflicted remuneration in certain circumstances. For example, if the benefit could not reasonably be expected to influence whether the licensee gives the information or deals in the product, or the way in which the licensee gives the information or deals with the product.
These changes are significant for licensees operating in the life insurance industry as they extend the application of conflicted remuneration to non-advice scenarios and will impact multiple distribution channels for life risk insurance products.