FSR weakens insurance commissions laws

Reforms of financial services laws in Australia earlier this year appear to have made legal the style of commissions for insurance brokers that were previously banned, and which are now are at the centre of a scandal in the US insurance industry. The Financial Services Reform Act, which came into force in March, did not carry through the ban on so-called contingent commissions that was in place under the two-decade-old Insurance Act. Contingent, or “soft”, commissions are paid by insurers and underwriters on top of the standard commission that brokers receive for placing business with them. They kick in when brokers place a certain volume of business with a particular insurer or achieve other benchmarks.