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

ASIC examBest interests duty, conflicted remuneration and fee consents

Consider these statements about life risk insurance commissions. (i) A benefit given because of the issue of the product is capped at 60% of the first-year policy cost. (ii) If the policy is cancelled in its second year, 100% of the first-year benefit 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: ASIC Corporations (Life Insurance Commissions) Instrument 2017/510 s5(2) sets an acceptable benefit ratio of 0.6 for the year the product is issued. Statement (ii) is false: under s6 of that instrument the clawback is 100% for a trigger event in the first year and 60% for a trigger event in the second year (Corporations Act 2001 s963BA, compilation 19 Sep 2026).

Common mistake

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

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