The new requirements regarding informed client consent for life insurance commissions are set to take effect on 10 July 2025, with significant implications for advice practices and licensee oversight. These reforms are intended to strengthen transparency, reinforce trust, and ensure clients make fully informed decisions about the remuneration their adviser receives.
What Advisers and Compliance Managers Must Do
If you provide personal advice and receive insurance commissions on life products, you must:
- Obtain the client’s informed prior consent to receive the commission
- Maintain a record of the written consent, or a written record of verbal consent
- Provide a copy of the written consent to the client
Note: Consent must be obtained before the commission is paid.
What Must Be Disclosed to Obtain Informed Consent?
Clients must be given all of the following details before they can provide valid informed consent:
- Name of the insurer
- Commission rate (initial and renewal)
- Frequency of commission payments (e.g. annually, monthly)
- Nature of the services the adviser will provide in relation to the product
- Statement that client consent is required by law
- Statement that the consent, once given, is irrevocable
Additional Requirements and Clarifications
- Information must be clearly identifiable—buried disclosures won’t meet the standard.
- If the renewal commission rate increases or its frequency changes, new consent must be obtained.
- If insurance is varied or replaced, even at the client’s request, new informed consent is required.
- While there is no legal requirement to provide the insurer with a copy of the consent, they may request it for their own compliance purposes.
Tips for Internal Auditors
Auditors play a critical role in assessing whether these obligations are being implemented and effectively evidenced across licensee networks.
1. Disclosure Practices
While most licensees already disclose commission arrangements in Statements of Account (SOAs), auditors should verify that the required disclosures (e.g., irrevocability statement, services provided, and frequency of payment) are clearly and individually stated, not implied or buried in fine print.
2. Consent Documentation
Reviews should pay close attention to whether written client consent (or a record of verbal consent) exists, and whether a copy has been provided to the client. This is especially crucial in high-turnover advice businesses where client records may be inconsistently maintained.
3. Verbal Consent Standards
If verbal consent is used, ensure that:
- The verbal consent is documented in detail
- A written copy is sent to the client
- The consent includes all prescribed elements listed above
Best practice: Auditors should recommend incorporating these steps into CRM workflows and adviser training.
4. Transfers and Replacement Advice
Policy transfers—particularly for life insurance issued or renewed after 10 July 2025—raise key compliance questions, especially where the adviser or licensee is changing.
- Intra-licensee transfer (AR to AR): likely lower risk, but still confirm consent is on file.
- Inter-licensee transfer: higher risk—new consent is likely required, especially if advice or servicing arrangements change.
Final Thoughts: Aligning Compliance and Oversight
While ASIC’s guidance leaves some room for interpretation, Compliance Managers should take a proactive stance, embedding the consent process into adviser workflows now, well before the July 2025 deadline.
For Auditors, the focus is on:
- Evidencing disclosure and consent rigor
- Identifying edge-case risks (e.g. commission increases, adviser transitions)
- Providing licensees with practical improvements, not just pass/fail findings
Call to Action:
Whether you’re navigating complex compliance requirements or seeking greater peace of mind, investing in internal audit coaching or engaging an independent auditor can be a strategic advantage, not just a regulatory compliance measure. If your business is ready to strengthen its audit processes, uncover hidden risks, or validate your internal controls with an expert second opinion, now is the time to act.
Contact our compliance team today to explore tailored internal audit support or consultation with an experienced independent auditor at [email protected]
