The proposals paper suggests retaining the current exemptions for benefits related to general insurance products and consumer credit insurance. However, financial advisers (relevant providers), insurance brokers, and other intermediaries providing personal advice to retail clients regarding general insurance products or consumer credit insurance must obtain their clients’ informed consent to receive a commission or other benefits.
“In order for the consumer to be able to make an informed decision, the relevant provider, broker, or intermediary must disclose to the consumer any commission and/or other benefits they would receive in connection with the issue of the general insurance product or consumer credit insurance,” the proposal said. “This requirement would not apply to other distributors of general insurance or consumer credit insurance products (such as white label providers or retailers) that distribute these products on behalf of the insurer.
“Where a general insurance product or consumer credit insurance can be renewed, consent could be sought prior to the initial issue of the insurance product and would not be required at each subsequent renewal, provided that the initial consent included the client’s agreement to the adviser, broker, or intermediary accepting a commission and/or other benefits on renewals.”
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Independent reviewer Michelle Levy noted that many key contributors to the misalignment between general insurance industry incentives and consumer interests have ceased or will shortly cease.
While accepting that commissions still present the risk of conflict, Levy said recent law changes diminished such risk, which will be further reduced by the proposals outlined in the initial proposals, including removing general advice and the requirement to provide “good” advice. She added that “a client should be put in a position to understand and consent (should they choose) to their adviser (broker) receiving a benefit from a product issuer.”
The proposal paper also delved into life insurance and time share, found on the Treasury’s website. NIBA confirmed that it will release its response to the proposals by November 14.