The Australian life insurance sector is navigating a period of intense and conflicting pressures, as a significant new regulatory standard designed to bolster operational resilience comes into force. This heightened compliance burden lands just as the foundational debate over the commercial viability of life insurance advice is reignited by the architect of the Life Insurance Framework (LIF). While insurers and licensees grapple with these systemic challenges, the industry continues to push forward with key leadership changes and product innovations, all while dealing with the long-tail legal consequences of past conduct.
A New Regulatory Era Begins with CPS 230
A new era of regulatory oversight began this week as the Australian Prudential Regulation Authority's (APRA) Prudential Standard CPS 230 on Operational Risk Management officially came into force on 1 July. The standard imposes significantly stronger requirements on all APRA-regulated entities, including life insurers, to manage operational risks, ensure business continuity, and oversee third-party service providers. In a clear signal to the industry, APRA stated it expects no “cutting corners” with the implementation of the new rules. To facilitate compliance, the regulator has now released the official notification forms for entities to use when reporting operational risk incidents or changes to service provider arrangements.
While APRA increased the compliance burden in one area, the Australian Securities and Investments Commission (ASIC) provided some practical relief elsewhere. ASIC announced it has granted a limited, forward-looking “no-action” position for licensees regarding certain deficiencies in the reportable situations regime, giving the industry more time to adapt to the complex breach reporting framework. This comes as APRA itself has acknowledged the industry's concerns about the growing regulatory load. The focus on resilience is underscored by a recent survey finding that cybersecurity is now the biggest concern for both super funds and banks, a risk CPS 230 is directly designed to address.
LIF Commission Debate Reignited, Questioning Advice Viability
The fundamental challenge of providing affordable and accessible life insurance advice was thrust back into the spotlight this week. John Trowbridge, the independent chairperson whose report formed the basis of the LIF reforms, has made a renewed call to review the structure of adviser commission caps. Trowbridge argues that the economic and regulatory conditions he anticipated ten years ago have not transpired, and that the cost to provide advice has risen, not fallen.
To address this, he proposes a modification where advisers could receive the higher of the current 60% upfront commission or a fixed dollar amount, such as $2,400. This model is designed to improve the commercial viability of providing advice to middle-market clients with smaller annual premiums, a segment that has largely been abandoned. The call has already begun to generate further industry debate over the future of risk advice remuneration.
Insurers Respond with Product Innovation and Leadership Changes
Amid the systemic pressures, life insurers are actively repositioning themselves through product enhancements and strategic appointments. ClearView has announced a series of trauma and underwriting updates, aiming to improve definitions and processes for clients. Supporting this initiative, the insurer has appointed a new Head of Underwriting to spearhead the changes, demonstrating a direct link between leadership and product evolution.
Significant leadership changes are also occurring across the sector. Specialist risk advice licensee Bombora Advice has appointed a new Managing Director and executive Chairman to guide its next phase. In a major move for the broader market, Acenda Group has named former Westpac executive Chris de Bruin as its new Group CEO, a move that follows its acquisition of Resolution Life Australasia. This activity unfolds as the industry continues to manage the legacy of past issues, with a major class action against CommInsure concerning alleged "excess premiums" now heading to court-ordered mediation, to be conducted by October 31. In a separate matter, the Australian Financial Complaints Authority (AFCA) ruled against an insurer in an income protection dispute, highlighting ongoing scrutiny of claims handling.
Context and Looking Ahead
This week marks a significant escalation of themes that have been building throughout 2025. While previous regulatory focus has been on guidance and preparation, the commencement of CPS 230 moves the dial from planning to mandatory compliance, creating a tangible new operational standard for all insurers. The call from John Trowbridge to reform the LIF structure is the most direct challenge to the existing advice remuneration model in years, moving the conversation from identifying the problem of advice accessibility to proposing a concrete, albeit contentious, solution.
The practical implementation of CPS 230 will dominate the immediate future for the life insurance sector. Insurers will be under pressure to demonstrate robust risk frameworks and prove compliance to APRA. The renewed debate over LIF commissions will likely become a central advocacy point for industry associations, influencing policy discussions ahead of the next election.
Key Takeaways:
- For Insurers and Licensees (Short-term, 0-3 months): Prioritise the finalisation and embedding of CPS 230 compliance frameworks. This includes urgently reviewing all third-party service provider arrangements and ensuring business continuity plans are tested and credible, in line with the new standard now in effect.
- For Risk Advisers (Short-term, 0-3 months): Actively engage in the renewed LIF debate through industry associations. This period represents a critical window of opportunity to provide feedback and influence potential policy changes that directly impact business sustainability and the ability to serve a broader client base.
- For all Licensees (Short-term, 0-3 months): Review and align internal processes with ASIC’s latest guidance on the reportable situations regime to take advantage of the temporary relief and ensure ongoing compliance with breach reporting obligations.
- For Underwriting and Product Teams (Medium-term, 3-12 months): Monitor product and underwriting enhancements from competitors, such as those announced by ClearView, as a benchmark for improving policy definitions, application processes, and overall client and adviser experience.
