Expanding clawback exemptions ensures adviser trust: AFA

The AFA has proposed expanding clawback trigger exemptions to revised life insurance remuneration reform regulations in a bid to ensure “trust and confidence in insurers’ treatment amongst small business advisers”.

In its submission to Treasury regarding the Revised Life Insurance Remuneration Reform Regulations introduced on 19 October, the AFA said it wants to ensure clawback is not required where the policy is cancelled due to a technicality within the insurer’s operational requirements, the terms of the policy changing or subsequent changes in the insured’s circumstances.

“Fine tuning the clawback trigger exemptions is sensible to not unfairly claw back remuneration from financial advisers within the first two years of policy inception in circumstances where they are not the cause of policies ending or premiums reducing,” the submission said.

“This will help raise trust and confidence in insurers’ treatment amongst small business advisers.”

In providing examples of situations to support its case, the AFA said clawback should not apply where a policyholder obtains a maternity leave ‘premium holiday’, noting that it technically results in a premium reduction and would trigger clawback.

“The circumstances that give rise to premium holidays are often unforeseen changes to the policyholder’s circumstances that the adviser has no control over,” the submission said.


The AFA also said clawback should not be triggered where a policyholder receives an inheritance or windfall that allows them to reduce their debts, hence their insurance needs consequently reduce.

“In such a situation, the work and effort expended by the adviser to set up the insured’s policies should not be unfairly penalised through a remuneration clawback where they had no ability to foresee such a change in circumstances in the short term.”

Expanding clawback exemptions ensures adviser trust: AFA
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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