A senate committee looking at the Future of Financial Advice (FOFA) reforms has called on Treasury to provide guidance on conflicted remuneration for consumer credit insurance.

The Senate Economics Legislation Committee has been told of confusion on whether this type of insurance is a life or general product.

According to a joint consumer group submission, commissions on consumer credit products are about 20% and this has been identified as a key factor in mis-selling. The group has called for a ban on commissions for these products.

The Insurance Council of Australia argued any ban on commissions would create inconsistencies with other insurance products of “comparable complexity”.

The committee had previously asked Treasury for clarification on how credit insurance will be evaluated under FOFA, and was told Treasury was “exploring this issue with industry”.

“The committee strongly encourages Treasury to update the industry and Parliament on the status of its consultations before the (FOFA) bill is considered by Parliament,” the committee’s report says. 

The committee has also looked at the carve-out of conflicted remuneration bans to authorised deposit-taking institutions (ADIs).

The committee was happy with ADI employees providing advice on non-banking products, such as insurance, as long as they are paid an ongoing salary.

“We encourages ADIs to consider the use of non-financial measures to determine incentive eligibility for employees, including customer satisfaction and quality, self-development and strategic process and quality in these instances,” the report said.