Brokers have at least a year to prepare for new commission rules requiring them to obtain permission from retail clients for their remuneration arrangements, after the Federal Government introduced legislation yesterday.

The Delivering Better Financial Outcomes Bill will become effective 12 months after it gains Royal Assent.

The bill is the first phase of the government’s response to the Quality of Advice Review final report, after consultations on proposed draft legislation wrapped up last December. 

“The legislation strengthens transparency and protections for consumers who receive personal advice by introducing a consent requirement before purchasing an insurance product that will result in a commission payment,” Financial Services Minister Stephen Jones said. 

Key measures in the bill before the House of Representatives include the introduction of disclosure and consent requirements for general and life insurance commissions as well as consumer credit insurance commissions. 

The National Insurance Brokers Association has outlined the key points of the bill for its members: 

- Where a broker has or expects to provide personal advice to a retail client, the broker must obtain the client's informed consent prior to receiving commission; 

- The commission must be disclosed in the form of percentage range;  

- Consent does not need to be provided in writing, however there must be a written record of the consent i.e. a client declaration or a written record of verbal exchange; 

- Consent is not required for a renewal provided the original consent included consent to receive commission for subsequent renewals and the percentage of commission is within the range the client previously consented to; and 

- If a business is sold, and client consent has been provided prior to the sale, the consent is carried over to the new broker provided the commission remains within the terms consented to by the client.  

Click here for the bill and explanatory memorandum.