The Insurance Council of Australia (ICA) has supported a Quality of Advice review proposal to continue the general insurance exemption from the ban on conflicted remuneration, while consumer groups are calling for an end to commissions.

Reviewer Michelle Levy has released a separate paper on conflicted remuneration, after a previous proposals document outlined plans for an overhaul of advice, and will provide final recommendations to the Government in mid-December.

ICA’s submission on the latest paper says it welcomes the conclusions and proposed recommendations put forward.

“We appreciate the recognition by the review of a range of factors relevant to the sale of general insurance in considering the appropriateness of the conflicted remuneration regulatory settings,” it says.

Ms Levy, in supporting the continued exemption, says laws such as design and distribution obligations, anti-hawking rules and deferred sales for add-on products have reduced risks and her earlier proposed reforms will also assist customers.

ICA is generally supportive of a proposal to enhance disclosure with a positive customer consent obligation, which Ms Levy says should be in writing, while suggesting the wording should differentiate between types of intermediaries.

“We would welcome further consideration by the review of the differences between intermediaries to ensure the proposal does not have any unintended consequences and truly results in enhanced transparency as opposed to customer confusion,” the submission says.

“Consumers seeking advice on the most suitable product available across the insurance market would typically engage a broker, whilst the services of an insurer intermediary may be more focused on providing specialist products on behalf of a single insurer.”

But consumer groups say in a joint submission that they are “extremely disappointed” with many of the proposals suggested by the review and have called for a prohibition on life, general and consumer credit insurance commissions and a move away from using disclosure as a way to reduce harm.

Consumer credit insurance continues to have issues and the Australian Competition and Consumer Commission northern Australian inquiry provides another prominent example highlighting consumer harm caused by a conflicted remuneration model, the submission says.

“The solution to reduce widespread consumer harm caused by conflicted remuneration is to remove conflicts of interest, not disclose them,” it says.

“Disclosing conflicts of interest regularly leads to perverse outcomes, including consumers placing more trust in an adviser, when they should be more sceptical of the advice.”

The submission was lodged by Choice, Consumer Action Law Centre, Financial Counselling Australia, Consumer Credit Legal Service WA and Super Consumers Australia.