Forced disclosure clause in draft insurance bill could kill industry, insiders complain
Industry players upset over vague clause on information about product commissions made in proposed bill to set up independent authority
The insurance industry is buzzing about a clause buried in a draft bill that will launch the Independent Insurance Authority.
The clause in the 478-page document says: "The Authority may … require a licensed insurance intermediary to take specified steps to ensure that disclosure is made to its clients of any commission or advantage that the intermediary receives or is to receive in relation to the policy recommended to the client."
That is a mouthful and also a potential bombshell for the industry. That means anyone selling insurance may be required to quantify and disclose all fees to the client before a sale.
"There is a lot in the bill that is questionable and controversial. This is one of many items," said Adrian King, a former chairman of the Confederation of Insurance Brokers.
The industry still has very strong views against disclosing commission
Although the bill could be applied to all insurance products, industry insiders expect it will only used for the problematic investment-linked assurance schemes (ILAS).
In an irony that would be appreciated by ILAS clients who have complained about the instrument's frequently opaque fee structure, the industry is upset that such a major rule change has been buried in vague language in the bill's fine print.