The FSC has given its support to the reintroduction of the Life Insurance Framework in Parliament following the release of its Life Insurance Code of Practice last week.
The FSC says the legislative provisions in the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 are on track to limit upfront commissions to advisers and ban conflicted remuneration provisions on life insurance products.
It said the bill will reduce conflicts and misaligned incentives by significantly reducing upfront commissions, extending the responsibility period to two years and prohibiting conflicted remuneration across life insurance.
These reforms apply across life insurance and to all advisers equally, the council said in a statement.
“It is important that quality financial advice is not adversely impacted by remuneration structures that can lead to poor consumer outcomes,” FSC chief executive Sally Loane said.
“Life insurance is a valuable investment for Australians, arguably the most important financial protection people can obtain because it helps protect people against the adverse economic impacts of premature death, illness, injury or disability.”
The FSC released its Life Insurance Code of Practice last week. The code will require insurers to improve disclosure to customers, provide greater transparency in communications, decide claims within set time frames, limit the use of surveillance and give additional support to vulnerable customers.
Risk Adviser’s sister publication ifa reported that the code received the support of some of the country’s major life insurers who said it was an important agreement to further build consumer trust in the industry.
The FSC said the code is government by an independent body and is mandatory for FSC members, who must be fully compliant by 1 July 2017.