Life Risk Advice

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Life risk advice remuneration 

The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 put in place arrangements, known as the Life Insurance Framework (LIF), to transition life risk advice providers from high upfront commissions to either a hybrid commission, level commission or a Fee for Service remuneration model when providing life risk advice service.  

The law permits a certain level of allowable upfront commissions to be paid to financial planners who provide life risk advice, as long as ‘clawback’ arrangements are met where a portion of the upfront commission is paid back to the life insurer by the financial planner if the life insurance policy is cancelled or the premium is reduced.  

 ASIC Corporations (Life Insurance Commissions) Instrument 2017/510 sets the following requirements for life risk advice remuneration:  

• commission caps – the maximum amount (or a way of working out the maximum amount) of commission that can be paid for a year based on a formula; and  
• clawback – an amount, or a way of working out the amount, that is an acceptable repayment of commission in the event that a life insurance policy is cancelled or not continued, or the policy cost is reduced in the first two years after the policy is issued – clawback provisions include 100% of the commission in year one and 60% in year two (no clawback in year three) of the policy.  

 The law also applies a ban on volume-based payments for life risk advice providers.  

 Guidance and resources  

• Life Risk Advice Guide – supports financial planners in applying the FPA Code, Legislated Code of Ethics and TASA Code of Conduct when providing life risk advice.  
• ASIC RG90 – Example SOA: Scaled advice for a new client – is based on a hypothetical limited financial advice scenario for personal insurance.   

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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