The proposed draft legislation for reforming the life insurance sector "exceeds" the original intent of the Life Insurance Framework agreement by giving ASIC the ability to determine future commission caps, says the AFA.
In a submission to Treasury responding to the draft legislation, the AFA said it is concerned about the wording of the bill since it gives the corporate regulator the ability to determine future commission rates.
"Our concern is that although this appears to give ASIC the power to enforce particular commission arrangements, it also gives [ASIC the] power to determine the quantum of those commissions, both now and in the future," the submission stated.
"This exceeds the intent of the LIF agreement by giving ASIC the power to unilaterally determine commission caps in the future.
"We do not agree with the drafting that gives ASIC unilateral ability to make future changes to life insurance remuneration and can't support that as it stands," it said.
The AFA proposed rewording section 963BA(2) of the legislation – which grants this power to ASIC – to include that the regulator "must undertake stakeholder consultation before making any changes to remuneration".
The association also said the legislation should state that the regulator "must attain ministerial approval before implementing any material changes to remuneration arrangements".
It should "expressly exclude" ASIC from having any powers to cap the rate of level commissions so that the market can "compete in the area of level commissions", the AFA said.
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