ASIC and the Corporations Act treat commission on group life insurance as not conflicted remuneration when a specific legislative exemption applies. The exemption generally applies where the commission relates to a group life insurance policy rather than individual retail life insurance advice. Commissions outside an applicable exemption remain subject to the conflicted remuneration prohibition.
Expanded Answer
The conflicted remuneration provisions prohibit benefits that could reasonably be expected to influence financial product advice. However, the Corporations Act provides a specific exemption for commissions paid in connection with group life insurance policies. Broadly, the exemption applies where the commission is paid in relation to a group policy issued to a trustee, employer or another group policy owner, rather than a retail life insurance policy held directly by an individual. As a result, commissions on eligible group life insurance are generally not treated as conflicted remuneration.
Applies when: The commission relates to an eligible group life insurance policy covered by the statutory exemption.
Does not apply when: The remuneration relates to an individual retail life insurance policy that is not covered by another exemption, or the payment falls outside the conditions of the legislative exemption.
The exemption removes the conflicted remuneration prohibition, but it does not remove other regulatory obligations. AFS licensees must still maintain adequate conflicts management arrangements under section 912A of the Corporations Act. Advisers must continue to comply with their best interests and related duties where they apply, and any required remuneration disclosures must still be provided. ASIC expects licensees to identify, assess and manage conflicts of interest even where commissions are expressly permitted by legislation.
Why it matters
Treating all group life insurance commissions as prohibited, or assuming all are exempt, can lead to compliance failures. Licensees should identify the relevant legislative exemption before determining how remuneration should be managed and documented.
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Practical guidance
- Identify whether the commission relates to an eligible group life insurance arrangement.
- Assess and document the legislative basis for relying on any conflicted remuneration exemption.
- Review conflicts management processes to ensure permitted commissions are appropriately identified, managed and disclosed.