Insurers and brokers say moves are under way to address unintended consequences from a bill to legislate disclosure and consent requirements for general insurance commissions.

The bill was introduced in parliament last month and contains a new provision of the Corporations Act 2001 stating commission disclosure and consent are mandatory for brokers providing or likely to provide personal advice to retail clients.

The provision also applies to life and consumer credit insurance commissions.

But the construction of section 963BB means brokers and other intermediaries that operate on a general advice model will no longer be exempted from the ban on conflicted remuneration, meaning they will be in breach of laws if they are paid commissions.

The Insurance Council of Australia (ICA) says the way section 963BB has been drafted “unintentionally removes the operation of the conflicted remuneration exemptions for persons not providing personal advice”.

“We understand that it is not the intention of the drafting to remove the current exemption for conflicted remuneration for general advice. ICA has raised this issue with the Treasury,” a spokesperson told insuranceNEWS.com.au today.

“ICA understands that options are being explored to resolve it.”

National Insurance Brokers Association (NIBA) CEO Phil Kewin told insuranceNEWS.com.au that while increasingly brokers provide personal advice to clients, there are some circumstances where brokers still provide general advice.

“We understand it is an unintended drafting error and moves are afoot to address it," he said. "NIBA will participate where necessary to assist in that process.”

The bill implements the first phase of the Albanese Government’s response to the Quality of Advice Review final report, after consultations on proposed draft legislation wrapped up last December.

Reviewer Michelle Levy proposed retaining the commissions model and added client consent as a guardrail to help consumers make “informed” choices on remuneration arrangements.

Radford Lawyers Principal Solicitor Mark Radford says the current wording of the bill does not have its “intended effect”.

“The intent of the change was to amend the act to provide that a person who provides personal advice to a retail client about a life risk insurance product, general insurance product or consumer credit insurance and receives a commission in connection with the issue or sale of that product must obtain the client’s informed consent before accepting the commission,” he said.

“If consent is not obtained, the existing conflicted remuneration carve-outs in section 963B [of the Corporations Act] would not apply to such providers.

“For those not providing personal advice to retail clients, the conflicted remuneration carve-outs would apply as normal and they would not need to seek any informed consent.

“Unfortunately, the drafting of section 963BB(1), as I read it, does not appear to have this intended effect. Instead, as drafted, it provides that the existing exceptions only apply if the relevant provider provides, or is likely to provide, personal advice to a retail client and obtains the relevant informed consent.

“This has the effect of removing the operation of the existing exceptions in section 963B for all persons not providing personal advice to a retail client, i.e. general advice providers etc. This exposes them to the conflicted remuneration ban, which was not what we understand was the intent.”