Michelle Levy speaking at the Conexus Institute Retirement Conference in Canberra earlier this year.

Quality of Advice Review lead Michelle Levy has recommended to keep life insurance commission alive, but with the caveat advisers must receive informed written consent to receive a commission. 

The interim proposals were released in late August, but life insurance commissions was excluded as she awaited further data before making a recommendation. 

In a separate proposal paper released this week, Levy noted the potential conflicts of interest commission have, but added that several recent changes to law, particularly from the Red October changes last year like anti-hawking, deferred sales of add-on insurance and design and distribution obligations will help mitigate consumer risk, along with her “good advice” proposals. 

“These proposals will limit the opportunity for insurance products to be distributed using general advice and they will impose an obligation for a person who gives personal advice to give ‘good’ advice,” she said. 

Levy said that monitoring from ASIC and enforcement “where appropriate” will be important and the proposals will also promote alternative sources of advice, notably digital advice. 

“By reducing the cost of advice the proposals may also encourage more advisers to charge advice fees and more clients to turn to advisers who charge advice fees,” she said. 

“In these circumstances, requiring a client to give their consent to the provision of a commission or other benefit should have more work to do: they will have alternatives.” 

Additionally, Levy proposed no changes to commissions for time-sharing schemes which is exempt from the Corporations Act. However, she noted it is outside her terms of reference and that the government should undertake a separate review. 

Issue of choice 

The current commission rate was viewed as “appropriate” by ClearView who believes retaining commissions is an issue of choice for consumers. 

The sentiment was shared by other life insurance advisers and product producers who spoke to Professional Planner earlier this year. 

In a media statement released Wednesday afternoon, MLC Life chief retail insurance officer Michael Rogers welcomed Levy’s proposal. 

“Consumers should have choice as to how they pay for financial advice,” Rogers said. “A sustainable advice sector supports everyday Australians having access to much-needed financial advice during key life moments. Otherwise, financial advice risks becoming the domain of the few who can afford it.” 

Rogers added the proposal must be viewed in the context of enhanced consumer protections and offered no opposition to for the commission disclosure requirement.