The Insurance Council of Australia (ICA) has provided insights to the Senate Economics Legislation Committee’s inquiry into the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024.
While the ICA supports the recommendations of the Quality of Advice Review Final Report, including new consent guidelines for commissions on personal advice for life risk, general, and consumer credit insurance, it has highlighted unintended issues with section 963BB in the bill.
The ICA noted that section 963BB could inadvertently make product issuers liable for compliance issues in the consent process, even when they are not directly involved. It had previously raised this concern with the Treasury, advocating that responsibility for obtaining client consent should be placed on advice providers instead.
“When the Exposure Draft of the Bill was released for consultation in late 2023, the Insurance Council made a submission to Treasury noting that the proposed drafting exposed product issuers to potential liability for non-compliance with the consent process, in circumstances where the product issuer is not required to be involved in (or aware of) the consent process,” it said.
To address this, Schedule 1, Part 5, of the bill revises section 963K, clarifying in the Explanatory Memorandum that product issuers are not liable for verifying that AFS licensees or representatives have properly obtained informed client consent. Additionally, issuers cannot be accused of providing conflicted remuneration if consent is not obtained.
The ICA also flagged a drafting issue in Schedule 1, subsection 963B(1), and section 963BB, where exemptions to the conflicted remuneration ban are conditional on personal advice. The way the clauses are currently worded could unintentionally restrict the exemptions.
The representative body stressed that the government did not intend for the provision to be interpreted this way.
Furthermore, it cautioned that the phrase “relevant product” in section 963BB could be confused with the term “relevant financial product” in section 910A. It recommended using terms like “related”, “applicable”, or “associated” to avoid misunderstandings.
“We will raise these matters and provide alternative drafting solutions to the Treasury, whom we are engaging with,” the ICA said.
Feedback is also needed for the review of the General Insurance Code of Practice. The ICA has supported this review and urged stakeholders to submit their insights and recommendations.
