Life insurance commission is not always conflicted remuneration. Under the Corporations Act, commissions paid on certain life insurance products are generally permitted when they meet the Life Insurance Framework (LIF) rules. This exception applies to eligible life risk insurance products and does not extend to investment products or commissions that fall outside the legislative exemption.
Expanded Answer
The conflicted remuneration provisions in the Corporations Act generally prohibit benefits that could reasonably be expected to influence financial product advice. However, Parliament created a specific exemption for commissions on eligible life risk insurance products, subject to conditions. ASIC expects AFS licensees and advisers to comply with both the conflicted remuneration provisions and the Life Insurance Framework remuneration limits.
Applies when: The commission relates to an eligible life risk insurance product and complies with the applicable legislative framework.
Not required when: The benefit falls outside the life insurance commission exemption or relates to financial products that do not qualify for the exemption.
Even where a commission is legally permitted, advisers remain subject to broader obligations, including acting in the client’s best interests (where applicable), managing conflicts of interest, providing appropriate disclosure, and maintaining effective conflicts management systems. A permitted commission is not automatically free from conflict, it’s simply not prohibited as conflicted remuneration under the legislative exception.
Why it matters
Confusing a permitted life insurance commission with a prohibited conflicted remuneration benefit can lead to incorrect compliance processes or poor advice practices. AFS licensees should distinguish between the legislative exemption and their ongoing obligations to identify, manage and disclose conflicts appropriately.
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Practical guidance
- Confirm whether the product qualifies for the life insurance commission exemption.
- Document how conflicts arising from commission-based remuneration are identified and managed.
- Review remuneration arrangements regularly to ensure they remain consistent with the Life Insurance Framework and your conflicts management framework.