This month we spoke to Insurance Business Australia about the new consent obligations affecting insurance brokers. You can see the article here.
Below is our deeper dive on the issue together with some helpful tips. This has been developed in line with ASIC Information Sheet 292 and current National Insurance Brokers Association (NIBA) guidance to help brokers navigate the informed consent obligations which take effect from 9 July 2025.
We will update this blog as soon as further guidance is provided. For now, brokers should be aware that this is a developing area and should monitor for updates from NIBA and ASIC as the implementation date approaches.
In layman’s terms, how would you define these new consent obligations to a broker?
The new obligations are all about enhancing transparency, accountability and acting in the best interests of your clients.
Applying to general insurance, life insurance, and consumer credit insurance products issued or sold on or after 9 July 2025, the new rules will now require AFS Licensees and representatives providing personal advice to retail clients to obtain their client’s informed consent before the insurance is issued or sold, retain a written consent (or copy it) or a written record of a verbal consent provided by the client, and give the client a copy of the consent as soon as practicable.
In plain terms, that means you need to clearly explain who is paying you, how much you will get, how often you will get it and what you’re doing for the commission before the policy is issued or sold. If the client does not understand and agree to this, you cannot accept the commission as it will be considered conflicted remuneration.
Specifically, you must disclose:
- The name of the insurer (if known);
- The commission rate or range (as a % of the premium);
- The frequency and period for which you will receive the commission (including renewals);
- The nature of any services you will provide to the client in relation to the product;
- A statement that obtaining client consent is a legal requirement; and
- A statement that the client’s consent, once given, is irrevocable.
This all needs to be explained clearly, concisely, and effectively in a way your client can genuinely understand – whether in writing or verbally (which should be confirmed in writing with the client as soon as practicable) – satisfying all of the above criteria.
This means using plain English, being upfront about how you’re paid and avoiding jargon so clients can make a genuine informed decision about whether to proceed.
When do these obligations apply exactly?
These requirements apply only when all three of the following are true:
- You provide personal advice which is advice that considers the client’s individual circumstances, goals, or needs (not general advice),
- The client is a retail client (an individual or small business (fewer than 20 employees, or fewer than 100 in manufacturing) who is purchasing a covered product), and
- The product is general insurance retail product, life insurance, or consumer credit insurance.
If you provide only general advice or deal with wholesale clients, these consent requirements also do not apply.
What about existing business placed before 9thJuly 2025?
You do not need to obtain informed consent from clients in the following scenarios:
· if you have a renewal of a general insurance first issued or sold before 9 July 2025; or
· If you have a renewal of a general insurance issued of sold after 9th July 2025 if both the following are satisfied:
- you disclosed to the client before the client agreed to be issued or sold the general insurance that their consent would cover any monetary benefits that the licensee or representative will receive upon renewal of that product, and
- the rate or frequency of monetary benefit upon renewal is equal to, or less than, the rate or frequency of monetary benefits disclosed to the client before the original consent: see section 963BB(2)(b) and (3).
The above has been extracted from the ASIC Guidance and would appear that an updated consent will only be triggered after 9th July 2025 in respect of renewals on the assumption that an initial consent was in place. We understand that there is some confusion about this nevertheless and further clarity may be provided by industry bodies over time.
What if the client doesn’t agree to the commission?
If a client does not give informed consent, you cannot accept the commission. Consider addressing client concerns early and, if necessary, discuss a fee-for-service arrangement. Brokers must still act honestly, fairly, and efficiently
What happens to consents if a brokerage is sold?
Where a brokerage is sold, any existing client consents for commissions on policies covered by the new regime automatically transfer to the new broker, provided the commission arrangements do not change. If the new broker wishes to change the commission rate, frequency, or other material terms, they must obtain fresh informed consent from the client before receiving further commission payments.
What are a few practical steps a brokerage should take to make sure they are in compliance?
There are some simple and practical steps brokerages can take to make sure they comply.
1. Know When and How the New Rules Kicks In: This is the absolute first step. The new consent requirements do not apply to commissions for insurance policies issued or sold before 9 July 2025.
The rule about getting client consent for commissions only applies when you are giving personal advice to retail clients on the covered insurance types.
Make sure everyone in your brokerage knows the difference between personal and general advice, and when they are giving personal advice on these specific insurance types to retail clients. This identifies when the process needs to be followed.
2. Train Your Team: Everyone who gives personal advice to retail clients on insurance needs to understand the new obligations and should be kept up to date on any changes. This is important as they need to be able to understand the laws when handling any tricky conversations with clients.
Hold a simple training session and create simple and easy to understand training materials. Explain why the rule exists and what your brokers need to do when giving personal advice on affected products to retail clients. As an AFS Licensee you must establish and maintain compliance measures, and this includes training representatives.
3. Build a Simple Script, Communication or Checklist for Personal Advice Conversations and supporting communications and encourage early engagement with affected clients: Create a standard script to help your team handle the commission discussion with clients before the insurance is issued or sold. Back this up with standardised communications that reinforce the rationale and requirement behind the new rules which apply across the industry. Keep these scripts updated. Also encourage your business to engage early with the client on the issue so there is less risk of taking conflicted remuneration.
Create a few simple sentences that every broker can use. This ensures consistency and covers the required points. Give them template communications that can be issued with all new affected policies. Early and active engagement with clients with the insurance cycle will also help build a legally defensive position when it comes to compliance.
4. Clearly Explain the Commission: Before the client agrees to the insurance (and before you receive the commission), you must clearly explain the name of the insurer, the commission rate and how often you expect to get paid.
In your conversation or using your script/checklist, make sure you tell the client everything you need to share about the commission, in a clear, concise and effective way they can easily understand.
5. Get “Informed Consent” and keep a record: After explaining your commission, you must get the clients permission. This needs to be “informed” consent, meaning they have had a genuine opportunity to understand.
Directly ask the client if they understand the information about the commission and if they agree/consent to you receiving it so you can arrange the insurance. Ensure that you follow a pre-agreed script that complies with new rules or request that they sign a compliant consent form.
6. Verbal consent is allowed, but you must make a written record of the conversation contemporaneously.
If consent is verbal your written record should be timestamped, noting the date, what was disclosed, and the client’s confirmation.
7. Give the Client a Copy of the Record: The client must get a copy of the written consent or the record of their verbal consent “as soon as practicable” after they give it. This record must be retained on the client’s file.
If you got verbal consent and wrote it down, send the client an email or letter summarising the conversation, confirming the commission details you disclosed, and stating that they gave their consent on that date, again observing the disclosure and informed consent rules above. This record-keeping is also part of broader duties for AFS licensees.
8. Try to automate or digitise compliance: Where possible, use digital systems to capture consents so there is less reliance on phone conversation record notes and email exchanges.
Consider the digitised solutions available to you and look to build an “all in one” compliance tool for the new rules that brokers can simply “plug and play’ which provides a written and auditable record down the track.
9. Plan for Renewals: A new consent is not required for renewals unless there is a change to the commission arrangement (e.g. an increase in rate or payment frequency), or the policy is varied or replaced with a new market.
Review your renewal process. Build review of commission consents into your renewal workflows.
The focus of the changes is about transparency and protecting clients, not banning commissions. With clear procedures/guidance tools and good record keeping, brokerages can continue to be paid for their services on a commission model while meeting regulatory expectations.
The above is provided for general information or educational purposes only. It is not to be relied on as legal, financial, tax or investment advice. We recommend readers obtain their own independent advice before acting on any of the information above.
