The Life Insurance Framework bill has passed through the Senate unopposed without amendments, despite Labor flagging concerns with the life insurance claims process and the need for a banking royal commission.
The Corporations Amendment (Life Insurance Remuneration) Bill 2016 was passed unanimously at 1:01pm in the upper house today.
Minister for Revenue and Financial Services Kelly O’Dwyer reintroduced the bill into Parliament in October last year, saying it would improve the quality of financial advice and boost consumer confidence in the life insurance sector.
The bill passed the House of Representatives in late November 2016.
Under LIF, the rate of upfront commissions paid to advisers will be phased down to a maximum of 60 per cent, with ongoing commissions capped at 20 per cent.
The bill will also introduce a two-year upfront commission clawback period under which 100 per cent of the upfront commission will be clawed back in the first year, and 60 per cent of the upfront commission will be clawed back in the second year, should a policy lapse.
Level commissions and fee-for-service remuneration will remain and be uncapped.
The changes will commence on 1 January 2018 and will apply equally to all life insurance advisers, and will provide flexibility to ensure the reforms capture all life insurance channels in the future, including those that may not be considered to be providing financial advice.