Addressing these concerns through its submission to Treasury’s options paper on CSLR sustainability, the council stated their belief that the reforms need to address root cost drivers and put the scheme on a “genuinely sustainable footing, rather than simply finding new ways to fund it”.
Treasury announced the consultation paper back in August of 2025 to consult on the statutory options available to deal with the CSLR 2025-26 revised claims, fees and costs estimate.
As highlighted by the council, the CSLR operator has projected 2026-27 financial year costs of more than $137 million, with around $127 million of that to land on financial advice alone. The options paper highlights that this would far exceed the amount a single sector can be charged, with the proposal being to widen levies across the broader financial services industry.
The Insurance Council argues that the general insurance sector, including life insurance, be spared from these widened levies and the CSLR in general, highlighting that insurers are not connected to issues driving complaints to the scheme.
“Moreover, consumers cannot access the scheme for general insurance complaints, yet policyholders would bear the cost of any special levy on the industry,” the organisation added.
Another key aspect of reforms in the Council’s opinion should be changing CSLR-eligible capital loss to be limited to actual capital loss. They also called for removing hypothetical scenarios from loss calculations which would reduce disputes and support the scheme’s sustainability.
The council’s submission also sets out four core principles they believe should guide reform:
- Reinforcing the CSLR as a genuine scheme of last resort
- Aligning funding responsibility with causation
- Avoiding cross-subsidisation across unconnected sub-sectors
- Prioritising structural reforms that reduce the scale of claims
“The CSLR plays an important role in protecting consumers harmed by financial misconduct and keeping it sustainable means addressing the conduct that drives claims rather than relying on repeated levies,” Insurance Council deputy chief executive Kylie MacFarlane said.
“The fairest approach is for the sub-sector responsible for the misconduct to fund the compensation, supported by reforms that ensure firms can meet their obligations in the first place.”
She argued that insurance customers can’t access the CSLR, so they shouldn’t be required to subsidise losses from other parts of the sector.
“We welcome Treasury’s focus on this issue and look forward to working together on reforms that protect consumers and keep the scheme sustainable.”
Other industry bodies, such as the FAAA, have also criticised the levy model, labelling it as “unworkable”, taking a particular issue to the new “waterfall approach” where advisers essentially pay the first $40 million of any payout before other sectors begin to contribute.
“That places a disproportionate burden on financial advisers and doesn’t reflect the broader range of parties involved in these failures,” Phil Anderson, FAAA general manager of policy, advocacy and standards said.
“If you look at it in a normal operating environment, not just the extreme cases, requiring advisers to fund that first $40 million is not appropriate. It’s a significant impost on a small business sector and it’s not conducive to what we’re trying to achieve, which is growing the profession.”
He added: “We don’t think this should be framed as a choice between the current model and a $40 million cap. There are alternative approaches that could be considered – for example, a lower cap – that would better balance the burden across the system.”
