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Trowbridge Bill introduced into Parliament


Trowbridge Bill introduced into Parliament

February 11, 2016 9:12 PM | Posted by Batten, Richard | Print this page

The Bill to introduce the Trowbridge reforms, the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 (Cth) (Bill), has been introduced into the House of Representatives.

A copy of the Bill and its Explanatory Memorandum (EM) comparing those documents to their exposure drafts released on 3 December 2015 are attached here and here.

The Bill does not include any fundamental changes to the proposed commission caps, their amounts, clawback, grandfathering arrangements or the planned 1 July 2016 implementation of the reforms.

However, a number changes have been made since the exposure draft which refine or clarify the application of the regime.

Key examples include:

Caps

  • Product fees used to calculate the policy cost/benefit ratio are now restricted to fees paid to the product issuer rather than any fees paid generally.
  • A new-regulation-making power to provide additional exclusions from policy costs has been included – this has replaced the express exclusion for Commonwealth / State / Territory Taxes. Presumably these will be included in a regulation where greater flexibility is available to address the issues identified in relation to stamp duty on first year's premium.

Clawback

  • An express exclusion from clawback for cancellations due to claims has been included (interestingly, suicide and self harm are now omitted – presumably for inclusion in a regulation, which the EM suggests could also exclude expiry ages and smoker-status change).

Grandfathering

  • A new regulation-making power has been included to facilitate alignment with current FOFA grandfathering exemptions.
  • Grandfathering has been extended to benefits paid under pre-commencement arrangements to policies applied for prior to commencement and issued within three months after commencement.

CCI

  • A new exclusion for consumer credit insurance has been included on a blanket basis ie without being subject to the caps/clawback level (noting the National Credit Code caps will continue to apply).

 

There are also a number important aspects where the Bill has remain unchanged, for example:

  • equal treatment of general and personal advice;
  • no caps on the level-commission limb of the exemption; and
  • responsibility for setting the commission caps and clawback requirements rests with ASIC.

The EM also provides new details of the scope of the 2018 industry review which the Government has requested ASIC to undertake.  The areas to be the subject of review  include:

  • distribution and sale of life insurance;
  • the provision of advice;
  • adviser commissions;
  • policy lapse rates and premiums;
  • life insurance lapser rates; and
  • other related factors such as the impact of a code of conduct.

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