General insurance products are excluded from the conflicted remuneration obligations in respect of monetary or non-monetary benefits.
However, from 9th July 2025, where personal advice is provided, or is likely to be provided, on general insurance products, the exclusion for monetary benefits only applies if the client’s informed consent to the monetary benefit has first been given.
Refer: Corporations Act s963B(1)(a), s963BB, s963C(1)(a), and reg 7.7A.12G. Also refer ASIC RG 246 and INFO 292.
what are the requirements?
- If you are a general insurance broker holding an AFS licence (or an [authorised] representative of a licensee) that receives monetary benefits (e.g. commissions) in connection with issuing or selling general insurance to a retail client while providing, or being likely to provide, personal advice to that client, you must:
– obtain the client’s informed consent to receive the benefit before the insurance is issued or sold;
– have the client’s written consent (or a copy of it), or a written record of any verbal consent that the client gave, and
– as soon as practicable after the client provided informed consent, give the client a copy of the written consent, or a copy of the written record of the client’s verbal consent
what does this mean in practice?
- The informed consent requirement applies to monetary benefits received by brokers from insurers (including underwriting agencies & Lloyds coverholders) given in connection with general insurance issued or sold after 9th July 2025 (including renewals after that date).
- if a broker is an authorised representative, the obligation applies to you in your capacity as an authorised representative.
- personal advice is financial product advice where the broker has considered one or more of the clients objectives, financial situation and needs or a reasonable person might expect the broker to have considered one or more of those matters. All other financial product advice is general advice.
- The informed consent requirement does not apply to monetary benefits given in connection with insurance issued or sold by AFS licensees and representatives if only general advice is provided or likely to be provided. If the situation involves both general advice and personal advice, the informed consent requirement applies to these benefits.
- The informed consent requirement does not apply to the giving of non-monetary benefits (e.g. education and training) to AFS licensees or representatives in connection with issuing or selling insurance. Note that AFSL general obligations ‘efficient, honest & fair’ and ‘conflicts of interest’ would apply to these arrangements especially if they are used to ‘disguise’ otherwise commission payments. This would also be misleading or deceptive conduct.
- If you are paid a monetary benefit without obtaining informed consent from your client, the monetary benefit you receive will breach the ban on conflicted remuneration. The consequences of breaching this ban could include a civil penalty, a banning order, or AFS licence suspension or cancellation.
what must be provided to the client before they provide informed consent?
Before a client can provide informed consent, you must disclose the following information to them:
– the name of the insurer under the relevant product if known
– the rate of the monetary benefit that you will receive: expressed as a percentage range of the policy cost for general insurance (e.g. 10–20% of the premium),
– the frequency with which you will receive the monetary benefit, and the period over which the benefits covered by the consent could be given (if more than one monetary benefit will be given in connection with the issue or sale)
– the nature of the services that you will provide to the client in relation to the relevant product (if any)
– a statement that it is a requirement of the law that the client’s consent must be obtained before the payment of an insurance commission, and
– a statement that the client’s consent, once provided, is irrevocable
- ASIC expects information disclosed to clients to be worded and presented in a clear, concise and effective manner. When presenting the information, to promote understanding, the rate of monetary benefit should be in a font that is at least the same font size as that predominantly used for other text in the information
- The information may be included in a Statement of Advice provided for personal accident and sickness insurance
- Legal advice should be obtained, however my view is that the information must be provided in a document that is seperate from the FSG however, for NIBA brokers, may be included in the Terms of Engagement provided it meets the informed consent regulatory timing and content requirements and has a clear heading to distinguish it from other information provided. However, better practice would be to provide in a seperate stand-alone document.
- Clients are not considered to have had a ‘genuine and real opportunity’ to make an informed decision if the information is not clearly identifiable as information being disclosed to the client to assist them decide whether to be issued or sold the relevant insurance. This is because such information would not prominently and clearly bring to the client’s attention the consent being sought.
- Actual consent is required therefore the client should be asked to sign and date the information notice and a copy of the consent retained in your records.
- You will need to obtain a new consent if the rate of renewal benefit of an insurance product is higher than the rate of monetary benefit previously disclosed to the client, or you propose to increase the frequency of monetary benefit, you will need to obtain new consent from the client. You may do this by seeking new informed consent from your client or by seeking the client’s consent to vary their original informed consent.
What records need to be kept?
As an AFS licensee, you should ensure that you and your representative(s) keep records to demonstrate compliance with the informed consent requirement.
You must keep the following records for at least 5 years:
- a copy of the information disclosed to a client before that client provided consent
- a copy of any variations to information disclosed to a client that the client has consented to and evidence of the client’s consent
- each written consent (or a copy of it) that a client provides and its date
- each written record of a client’s verbal consent (or a copy of the written record of any verbal consent) and its date, and
- a record of the date the client was given a copy of the written consent (or a copy of the written record of any verbal consent) and supporting evidence
What should you be doing now?
- obtain legal advice on how the new regulations apply to your business
- draft (and obtain legal sign-off) on the notice of information to be provided to the client before the client provides informed consent
- train your staff and representatives on the new requirement and changes to operational practices
- amend your procedures to ensure that the notice of information is provided before any personal advice is provided and that the informed consent is received from clients including instances where verbal consent is provided
- update your Compliance Manual, obligations register & key controls
- include the obligation in your control testing and monitoring programs
- update your incident management procedures to capture instances of non-compliance
- ensure that the notice and client consents are maintained in your records and meet the regulatory requirements
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