Reforms to the Income Protection Market

On 2 December 2019, APRA announced some key reforms to the Australian Individual Disability Income Insurance market designed to address the fundamental issues in the viability of the income protection market.  These changes included the discontinuance of agreed value cover from 31 March 2020 and further measures that were subject to consultation. Please click here for a copy of this initial letter to the life insurers.

On 6 March 2020, the AFA along with the FPA made a submission to APRA as part of our Joint Associations Life Insurance Task force. Please click here to see a copy of our submission.

On 30 September 2020, APRA issued their final determination with respect to changes that they expected to the IDII market.  This final determination provide some additional flexibility in the calculation of income at risk for people who are not in predominantly stable incomes.  It also resulted in some changes to the income replacement ratio caps. Please click here to see the letter to the life insurers.

Actuaries Institute IDII Taskforce

The Actuaries Institute established a taskforce to address the sustainability issues in the IDII market.  This taskforce produced a report on 25 September 2020, that included three separate parts:

On 11 November 2020, the AFA along with the FPA made a submission to the Actuaries Institute as part of our Joint Associations Life Insurance Task force. Please click here to see a copy of our submission. Whilst we are supportive of changes to address the sustainability of the IDII market we do not accept that changes implied by the Actuaries Institute Reference Product will deliver an acceptable outcome for consumers.

Life Insurance Reform

The Australian life insurance industry was subject to intense review since October 2014 when the regulator, ASIC, released a flawed report on life insurance (Report 413 – see below).  

In November 2015, the Minister announced a package of reforms providing for:

  • a three-year transition toward lower upfront but higher ongoing hybrid commissions,
  • an ASIC Review of policy cancellations over the three-year period,
  • a Code of Practice for life insurers,
  • APLs to be widened through an FSC industry standard, and
  • shorter more effective SoAs for life insurance advice.



Useful links

FSC Life Insurance Draft Code of Practice 2.0

The AFA actively participated in the consultation process as part of the development of the FSC Life Insurance Code of Practice.  

Industry Standard on Approved Product Lists

One of the last pieces of the reform package announced by the Minister in November 2015 progressed to a tangible state in April 2017 with the Financial Services Council releasing a draft Industry Standard for approved product lists.  

The AFA saw this as a good first step in widening APLs, standardising the way that life risk product selection committees operate, setting standards for ‘Off APL’ / legacy product approval requests, APL reviews and addressing conflicts of interest in approval procedures.

Insurance in Super Working Group

In late 2016, a working group was formed by the FSC, AIST, ASFA, IFF and ISA to develop standards around insurance within superannuation practices and protocols.  

The AFA represented the interests of advisers and superannuation members and presented over 21 recommendations to improve the Working Group’s proposals on both discussion papers.

In September 2017, the ISWG issued a draft Code of Practice and invited submissions from interested parties. The AFA made a submission expressing our concerns about the consequences of some of these proposals.

Parliamentary Joint Committee Inquiry into the Life Insurance Industry

The Parliamentary Joint Committee on Corporations and Financial Services has been referred an Inquiry from the Senate. 

The AFA has always taken the position that life insurance reform needs to be approached holistically.  

Revised Life Insurance Remuneration Reform Regulations

On 16 October, Treasury released revised Regulations to support the Revised LIF Bill that was introduced to the House of Repesentatives on 12 October.  The AFA welcomed the Revised Regulations noting improvements in the Regulations that were as a result of AFA advocacy for financial advisers.

Parliamentary Joint Committee Inquiry into the Life Insurance Industry

On 14 September 2016, the Senate agreed to a motion from Senator John Williams to refer the life insurance industry to the Parliamentary Joint Committee on Corporations and Financial Services.  

Actuarial Advice within Life Insurers and the Role of the Appointed Actuary

The Australian Prudential Regulatory Authority (APRA) has proposed several measures to refine the actuary role within insurers and made some specific proposals for life insurers.  The AFA considered these reforms long overdue and part of the holistic approach needed to address the problems within the life insurance industry.  

Life Insurance Code of Practice

From the AFA’s first meeting with the Life Insurance Advice Working Group (LIAWG) in late 2014 we have called for a Life Insurer Code of Conduct that includes the relationship between insurers, licensees, advisers and clients. 

The FSC launched the Life Insurance Code of Practice on 11 October 2016.  The AFA had been very actively involved in the development of this Code and we believe further substantial improvements were required.

Life Insurance Statements of Advice Projects

In June 2016, following meetings with ASIC, the AFA was invited to participate in a project to develop shorter, more effective Statements of Advice (SoA) for life insurance. This was part of the reform package announced by the Minister in November 2015.  

Coincidentally, the FSC also had a project to develop shorter life insurance advice SoAs.  

ASIC Review of the Life Insurance Reforms

Part of the Minister’s package of reforms announced in November 2015 was a requirement that life insurers provide information on policy cancellations to ASIC.  The AFA consideed this as a keystone in the reforms because substantive discussions could take place on the reasons for policy cancellations and get to the bottom of allegations that ‘churn’ is a problem in the profession. 

The AFA convened a Life Insurance Quality Advice (LIQA) Member Committee for this purpose.

Scrutiny of Financial Advice Senate Inquiry

On 2 March 2016, the Senate added additional wide-reaching terms about the life insurance industry to the Economics References Committee as part of its inquiry into the implications of financial advice reforms.  The AFA proposed a comprehensive series of recommendations about how insurers, associations, licensees, regulators and government can support consumers accessing quality advice on life risks and improve insurer culture and practices.  The Inquiry lapsed upon dissolution of Parliament for the 2016 federal election.

Life Insurance Remuneration Arrangements Regulations

Just prior to the double dissolution of Federal Parliament, Treasury released draft Regulations to accompany the Bill (see further below) and to clarify some aspects of the Framework that were unclear in the Bill.  

Senate Progress of the Life Insurance Remuneration Arrangements Bill


On 25 February 2016, the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 was referred to the Senate Economics Legislation Committee to ‘consider the implications of the Bill on the life insurance industry and to allow relevant stakeholders to voice their opinions on the Bill’. The Bill lapsed upon dissolution of Parliament for the 2016 federal election.  We expect it to be re-introduced shortly.

ASIC’s Class Order to oversee the Life Insurance Framework

In February 2016 after the release of the draft Bill, ASIC released a consultation paper to outline how it proposed to oversee the Framework’s operation – as provided for in the Bill.  The AFA has been in ongoing discussions with ASIC about ASIC’s role in LIF to ensure competitive neutrality, equal application of LIF and granular data on policy cancellations.

The First Version of the Life Insurance Remuneration Arrangements Bill

In response to the Life Insurance Framework legislation released on 6 November 2015 by the Government, the AFA achieved refinements to the clawback provisions. 

The AFA reviewed the Government’s release of Exposure Draft Legislation for the Life Insurance Framework and the release of draft legislation on Professional Standards for Financial Advisers in December 2015.  Through the contributions of AFA Members, we lodged a detailed submission to Treasury explaining how the draft Framework was flawed and recommending several improvements that were later reflected in the updated Bill.

Trowbridge Final Report

On 26 March 2015, John Trowbridge released his final report.  The report was his own, and not a report from the AFA.  The AFA disagreed with significant components of the report and we believed that a comprehensive review of the implications of recommendations is required before any changes are implemented.

Trowbridge Interim Report

On 17 December 2014, John Trowbridge released his interim report that addressed a range of issues and options in response to the ASIC report.  Key issues included:

  • The quality of advice,
  • Remuneration and other adviser incentives,
  • Insurer practices and product offerings, and
  • Industry productivity.

John Trowbridge called for submissions in response to his interim report with a closing date of 30 January 2015.  

ASIC Report 413

In October 2014, ASIC released a report detailing the outcome of surveillance on life insurance financial advice in the industry.  

It was a highly targeted report with a sample group that we believed was not reflective of the broader retail life insurance advice market.  Further, it did not differentiate between good insurance advice that failed compliance and inappropriate advice where there was likely to be client detriment.  

Financial System Inquiry

In late 2013 the Australian Government announced the appointment of David Murray, to oversee a broad inquiry into the Australian financial system.  

The 350-page final report was released on 7 December 2014, making over 40 recommendations.  The most relevant recommendation was the proposal that commissions on life insurance should be limited to level commission terms. Unfortunately the inquiry did not consult with advice associations on this key recommendation.

FSC’s Replacement Business Framework

A debate on the need for change in life insurance industry was raised through submissions to the Ripoll Inquiry into financial advice laws.  In April 2012, the FSC released a consultation paper to address “churn”. 

These industry-initiated measures were intended to coincide with the commencement of the Future of Financial Advice reforms.  In February 2013, the FSC announced that it would discontinue the initiative.