General insurance commissions will remain under a Quality of Advice Review recommendation but brokers providing personal advice to retail clients will require written consent to be remunerated in this manner.

The Review, led by Reviewer Michelle Levy, released its Conflicted Remuneration Paper last week setting out why it backs keeping commissions despite acknowledging the arrangement does lead to a “conflict” that can mean consumers may not be getting quality advice if brokers are being paid by product issuers.

Legislative changes in the last few years after the Hayne royal commission have “diminished” the risk of consumers not receiving good advice, the Paper says. The changes include measures in relation to anti-hawking, deferred sales of add-on insurance, design and distribution obligations, and the commission caps on consumer credit insurance.

“The general insurance industry is changing, voluntarily and in response to recent changes to the law,” the Paper says.

“We have been told that, as a result of these changes, many of the key contributors to the misalignment between industry incentives and consumer interests such as volume bonuses and junk products have ceased or will shortly cease.”

Brokers are pleased with the recommendation to keep the commission model but are concerned over the written consent requirement, pointing out remuneration details are already mandatory disclosures when they issue a Financial Services Guide to retail clients.

The National Insurance Brokers Association’s (NIBA) new Code that commenced this month requires members to disclose their remuneration but this obligation has been pushed back to next year pending the outcome of the advice review and ongoing member consultations.

CEO Phil Kewin says it may be “possibly problematic” to have to secure consent in writing from clients but is confident it can be ironed out.

“We need to flesh out what that means. Sometimes clients just don’t respond,” Mr Kewin told insuranceNEWS.com.au. “If you detail the commission on the invoice and then the premium is paid, does that count as consent? These are questions that we can work through.”

Consumer advocate Choice is adamant commissions must be axed and is not convinced the proposed written consent measure will protect clients.

“Disclosure is an ineffective form of consumer protection. Conflicts need to be removed, not simply disclosed,” Choice Head of Policy and Government Relations Patrick Veyret told insuranceNEWS.com.au.

“It’s critical that general insurance commissions need to be banned. It’s long overdue that this harmful loophole is closed.”

Click here for the Conflicted Remuneration Paper.