Insurance commission consent – conflicted remuneration escape hatch

Licensees who provide financial product advice in relation to general insurance, life insurance or consumer credit insurance will be familiar with the exemption from conflicted remuneration for commissions on these products.

However, from 9 July 2025, if you provide, or are likely to provide, personal advice, the exemption will only apply if you obtain consent from the client in the following way.

Disclosures

First, before the client consents to giving you the benefit, you must disclose to the client:

• the name of the insurer;
• for a general insurance product, the rate of the monetary benefit, expressed as a percentage range of the policy cost for the product;
• for a life risk or consumer credit insurance product, the rate of the monetary benefit, expressed as a percentage of the policy cost payable for the product;
• if more than one monetary benefit will be given in connection with the issue or sale of the relevant product, the frequency of giving those monetary benefits and the period over which monetary benefits covered by the consent could be given, including any renewals;
• the nature of any services that the licensee or representative will provide to the client (if any) in relation to the relevant product;
• a statement that it is a requirement of the law that client consent must be obtained before payment of an insurance commission;
• the fact that the consent is irrevocable; [i] and
• for a general insurance product, if you want to rely on this first consent for renewals (see below), the fact that this original consent will cover renewals of the product. [ii]

Consent

Then, before the product is issued or sold to the client, you must obtain the client’s consent.  You must either get:

• the consent in writing or a copy of the written consent; or
• the consent by some other method other than in writing (say, orally) and keep a record the consent. [iii]

It is not clear whether there is any limit to how far in advance of the issue or sale you might be able to obtain the client’s consent.  However, Ms Levy, in Quality of Advice Review Final Report December 2022, noted that making the disclosures and obtaining consent prior to the provision of the advice gives the client the option of negotiating to pay a fee for the advice (presumably on the basis that it would be more likely to be impartial) instead of allowing the adviser to be paid via commission from the insurer.[iv]

A copy of the written consent or a copy of the record of the consent must be given to the client as soon as reasonably practicable after the consent is obtained.[v]

Changes to disclosure information

If one of the following disclosure items changes after consent has been obtained, you may disclose the variation(s) to the client and have them consent to the variations as a method of meeting consent requirements.  This will excuse you from the need to provide the full list of disclosures again.  The relevant items are:

• name of insurer;
• rate of the monetary benefit;
• frequency of monetary benefits and period over which they could be given; and
• nature of services to be provided by the licensee or representative in relation to the relevant product.[vi]

Relying on previous disclosure

If you have already disclosed all the information required to be disclosed as part of the consent process, previously, you do not have to disclose it again.

Relying on previous consent

Consent to a particular rate or frequency is taken also to be consent to a lower rate or frequency than that disclosed.  In other words, if you are uncertain, disclose the higher end of your uncertain range and this will cover you for everything below it.

For general insurance products, you can rely on the consent given in connection with the issue or sale of the original policy, for renewals of the policy, provided that:

• the original consent stated that it would cover renewal; and
• the rate of the renewal benefit is equal to or less than that disclosed to the client before the original consent was given.[vii]

Consent on sale of business

Insurance commission consent passes from seller to buyer with the sale of a financial product advice business.[viii]

Protection for product issuer

An issuer or seller of a financial product is expressly prohibited from giving a licensee or representative conflicted remuneration.  In case you wondered, there is an exemption from this prohibition where the benefit is conflicted remuneration only because of a failure on the part of the licensee or representative to meet the consent requirements.[ix]

Transitional arrangements

Importantly, for a general insurance product issued or sold before 9 July 2025, renewals of that product do not need to meet the above consent requirements in order for benefits associated with them to be exempt from being conflicted remuneration.

General advice

For general advice given in relation to insurance products, the exemptions will continue to operate the way they do now, with no need for consent.

QAR reasons for reforms

If you’re wondering about the logic behind these reforms, Ms Levy was of the view that insurance is important and there was merit to arguments that some people are underinsured and that consumers are generally reluctant to pay fees for insurance advice.  This is way she recommended keeping the exemption from conflicted remuneration for insurance commissions.

However, she thought consent was preferable to disclosure when it comes to commissions.  This was because a true fiduciary relationship (as exists at general law, and on which the best interests obligations are modelled) would require the client to consent to the commission being received by the adviser.  Even though we are operating under a statutory framework, she thought it a good idea to remain consistent with the general law obligation.

Author: Samantha Hills (Partner)

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[i] Section 963BB(1)(c) of the Corporations Act 2001.

[ii] Section 963BB(3) of the Corporations Act 2001.

[iii] Section 963BB(1)(d) of the Corporations Act 2001.

[iv] Quality of Advice Review Final Report December 2022, page 171.

[v] Section 963BB(1)(e) of the Corporations Act 2001.  This subsection jumps straight to subparagraph 1(b).  There is no 1(a).

[vi] Section 963BB(5) of the Corporations Act 2001.

[vii] Section 963BB(3) of the Corporations Act 2001.

[viii] Section 963BB(4) of the Corporations Act 2001.

[ix] Section 963K(2) of the Corporations Act 2001.