The Federal Government has today introduced financial accountability legislation into Parliament, paving the way for insurance to come under a regime designed to prevent misconduct and elevate standards.

The Financial Accountability Regime (FAR), which strengthens obligations that have applied to banking and extends them to other sectors, is part of a final tranche of legislation bringing in Hayne royal commission recommendations.

“The FAR gives Australians greater confidence that where misconduct occurs those responsible will be held accountable,” Treasurer Josh Frydenberg and Minister for Superannuation, Financial Services and the Digital Economy Jane Hume said.

The law includes a requirement for at least 40% of executive variable remuneration, such as bonuses and incentive payments, to be deferred for at least four years, with impacts for non-compliance.

For insurance and superannuation, the regime will apply from the later of July 1 2023 or 18 months after commencement of the legislation, while for banks it will apply from the later of July 1 next year or six months after the laws start.

The legislative package introduced into Parliament also provides for a new Compensation Scheme of Last Resort (CSLR), recommended by the Ramsay Review in 2017 and later backed by the Hayne royal commission.

The Government says further consultations on the CSLR will take place as part of committee processes as the bill proceeds through Parliament.

The CSLR facilitates payments of up to $150,000 where an Australian Financial Complaints Authority determination for compensation remains unpaid in relation to disputes involving personal advice, credit intermediation, securities dealing and credit provision.

The Government will contribute to costs in the first year, allowing the scheme to start making payments from July, but later it will be fully industry funded through a levy.

“To ensure that the CSLR truly operates as a scheme of last resort the Government will also consult on proposals to enhance the effectiveness of professional indemnity insurance in responding to compensation claims,” Mr Frydenberg and Ms Hume said.