Government clarifies life insurance commissions reform

The Federal Government has released draft regulations which will apply if and when the legislation regulating life insurance commissions takes effect.

One important feature of the legislation is the provision for ‘clawback’ of life insurance commission if the policy is cancelled within 2 years. The draft regulation states that clawback will not apply in a number of circumstances. These include:

  • Situations of self-harm, suicide of the insured, or in circumstances where a policy is cancelled due to the insured reaching an age at which coverage is no longer provided or due to the insured being incorrectly described;
  • Circumstances where the policy cost is reduced as a result of a reduction to the health risk of the person insured. This would include, for example, a reduction in premium as the result of a decision by the insured to quit smoking – where this happens, there would be no clawback of commission; and
  • Rebates or discounts intended to encourage the acquisition or continued holding of a life insurance product. For example, clawback would not be triggered where an insurer offered a loyalty-based premium reduction.

The draft regulation also contains technical provisions to ensure that existing remuneration arrangements for brokers and advisers are grandfathered.

NIBA is reviewing the draft regulation, and will make a submission if appropriate. If any NIBA members have any comments they would like to make in regard to this issue, please forward them directly to NIBA CEO Dallas Booth at

Full details of the draft regulation can be accessed here.