The Financial Planning Association of Australia The Financial Planning Association of Australia

Life Insurance

Life insurance is a key part of every Australian’s financial planning. Its effective use provides significant benefits and peace of mind to Australian families, and reduces the cost to government.

On 3 December 2015 the government released draft legislation to implement its reform package for retail life insurance. The Assistant Treasurer also announced a new commencement date for the reforms of 1 July 2016. The government has not supported the FSI recommendation to change the life insurance commission model to level commissions only.

To support the implementation of the Life Insurance Framework, ASIC has released a consultation paper which includes the maximum levels of upfront and ongoing commissions and the amount of upfront commissions to be repaid under clawback.

Key components of the reform package

  • The new retention (‘clawback’) provision will move from a three to a two year clawback period as a result of combined representation by the AFA and FPA.
  • The commission structure proposed in June will now start 1 July 2016, which has moved from 1 January 2016 (capped at 80%, reduced to 70% from 1 July 2017, before settling at 60% from 1 July 2018).
  • The Government has stated that the premium on which the commission caps are calculated can include the base premium frequency loading and the policy fee (excluding GST and Stamp Duty).
  • These changes will apply across all channels, including personal advice, general advice and direct life insurance.
  • Industry will have responsibility for widening Approved Product Lists, through the development of a new industry standard.
  • ASIC and industry will work on more efficient and effective SOAs.
  • This effectiveness of the reforms will be reviewed by ASIC in 2018.

No changes will be made that affect industry’s ability to operate on a level commission or fee-for-service basis.

Read draft legislation (submissions due Monday 4 January 2016)

Read ASIC Consultation Paper (submissions due Friday 29 January 2016)

FPA Life Insurance Blueprint

Our view is that lasting change in the life risk sector will be driven by higher professional standards and improving the public perception of the life risk advice service offering. In particular, we aim to drive a competitive, professional, and ultimately valuable service to Australians through a sustainable model to provide life risk advice.

The FPA undertook an extensive member consultation in March 2015 which resulted in the development of the FPA Life Insurance Blueprint. The FPA used this member feedback in our negotiations with industry and the Government to find a professional, workable and balanced solution to the life insurance issues.

Using this feedback, the FPA proposed the following reform package – The FPA Life Insurance Blueprint:


FPA life insurance advice guide

Visit the FPA Member Centre to download the FPA Life Insurance Advice Guide — a comprehensive resource to support you in the area of life-risk advice.

The guide includes:

  • The ten core principles for providing best practice life-risk advice
  • Step-by-step guidance on meeting your best interest duty
  • How to apply the FPA Code of Professional Practice.
FPA Member Centre

Download a summary of the ASIC Report into life insurance advice

Download the ASIC Report

Any questions?

We are always keen to hear your valuable feedback and suggestions. Please let us know if there are any policy issues or concerns that affect you.

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