Treasury has started a review of the Australian Securities and Investments Commission (ASIC) industry funding model, with plans for a public consultation later in the year.

The review of the industry funding model comes five years after the cost recovery scheme commenced in 2017 to support the regulator’s supervision of the financial services sector, including insurance, via levies. The previous Coalition Government previously said that Treasury would undertake the review this year.

ASIC was primarily funded by taxpayers through government appropriations before the industry funding model was adopted, as proposed by the Financial System Inquiry.

“It is appropriate to review the [industry funding model] at this point given it has now been in place for five years, and over this period there has been substantial regulatory and structural changes within industry sectors resulting in increased cost pressures within certain sub‑sectors,” Treasury says.

Treasury says the review will be “forward looking” and focused on identifying refinements to the funding model that may be required to ensure its settings remain appropriate.

According to the scope of the review, Treasury will consider and where appropriate, make recommendations on the type of costs and nature of ASIC’s activities that are recovered from industry.

Treasury will examine how ASIC allocates costs to sub-sectors, changes in levy amounts since the industry funding model commenced, impact of cost burden and whether key aspects of the scheme remain “appropriate” in light of structural changes within the financial services sector.

The review will also look into the suitability of transparency and consultation mechanisms, including the Cost Recovery Implementation Statement (CRIS), and how ASIC could improve the accuracy of its estimates of costs to sub‑sectors.

In ASIC’s draft CRIS for the 2021/22 financial year, the regulator expects to recoup $332.3 million of regulatory costs via recovery levies and statutory levies for the period.

A sector-by-sector breakdown in the CRIS sets the insurance industry’s total levy at $67.008 million, comprising of $55.225 million in cost recovery levies and $11.783 million in statutory levies.

The CRIS says the insurance sector comprises of AFS licensees, including life and general insurance product providers, insurance product distributors (such as insurance brokers and AFS licensees who distribute products on behalf of an insurer), risk management product providers, and claims handling and settling services providers.

National Insurance Brokers Association CEO Philip Kewin says the review is an opportunity to “look at an equitable funding model that enables those entities doing the right thing to provide professional advice and services affordably to their clients”.

“While insurance brokers were never an issue in the [Hayne] royal commission, it's fair to say all of financial services were caught up in the post-royal commission washup,” Mr Kewin said.

“As the dust has well and truly settled on the post-royal commission environment, we now have an opportunity to look at a funding model focusing on education and communication rather than investigation and remediation.”

Click here for more details of the review.