ASIC financial adviser exam, Best interests duty, conflicted remuneration and fee consents question: ASIC's life insurance commissions instrument

ASIC examBest interests duty, conflicted remuneration and fee consents

Under ASIC's life insurance commissions instrument, for a life risk policy issued to a retail client outside super, … (i) a commission given because of the issue of the policy may be up to 60% of the first-year policy cost. (ii) if the policy is cancelled in its second year, 100% of the first-year commission must be repaid.

A (i) True, (ii) True
B (i) True, (ii) False
C (i) False, (ii) True
D (i) False, (ii) False

Show the answer and explanation

Answer: B. (i) True, (ii) False

Statement (i) is true: s5(2) of ASIC Corporations (Life Insurance Commissions) Instrument 2017/510, made under s963BA of the Corporations Act 2001 (compilation 19 Sep 2026), sets an acceptable benefit ratio of 0.6 for the year the policy is issued. Statement (ii) is false: under s6 of the instrument, the minimum clawback is 100% for a cancellation in the first year but 60% for a cancellation in the second year.

Common mistake

Clawback steps down from 100% to 60% in year two.

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