Document ID: chunk:federal_register_of_legislation:F2017L00636:body:0:p9
Version: federal_register_of_legislation:F2017L00636
Segment Type: other
Provision Reference: 
Character Range: 20218–22903

prescribed circumstances to be ignored
(19) In this section, in determining whether there has been a reduction in policy cost or the amount of a reduction in policy cost, any reduction because of circumstances prescribed for the purposes of subparagraph 963BA(3)(a)(ii) of the Act is to be ignored.
Products in force for exactly 12 months or 24 months
(20) For the purposes of this section, if a product is:
           (a) in force for 12 months and then cancelled or not continued into a second year, the product is taken to be cancelled or not continued during the second year; or
              Note:  This means that subsections (6) to (13) (as applicable) will apply when determining an acceptable repayment in relation to the cancellation or non-continuation of the product.
           (b)  in force during the 12 month period commencing on the date of a client initiated increase and then cancelled or not continued, the product is taken to be cancelled or not continued on the day immediately following the end of that 12 month period; or
              Note:  This means that subsections (10) to (13) will apply when determining an acceptable repayment in relation to a benefit given because of the client initiated increase.
           (c) in force for 24 months and then cancelled or not continued into a third year, the amount of the acceptable repayment in relation to the cancellation or non-continuation of the product is $0.
       Note 1: The following is an example of how the amount of an acceptable repayment is worked out:
           (a) A life risk insurance product is issued to the holder on 31 December 2020 with a policy cost of $1,000. The issuer provides a benefit of $600 to a financial services licensee in relation to the product.
           (b) The holder decides to continue the product for a second year and to increase the sum insured. The policy cost for the second year increases to $1,200, with $150 of the increase being because of the decision to increase the sum insured (a client initiated increase) and the remaining $50 because of a CPI increase to the sum insured. This issuer provides a benefit of $300 to the financial services licensee in relation to the product for the second year, of which $90 is because of the increase in the sum insured, with the remaining $210 being ongoing commission in relation to the product.
           (c) On 30 June 2022 the holder decides to reduce the sum insured. The holder also stops smoking. These changes reduce the policy cost by $100, with $60 of the decrease being because of the decision to reduce the sum insured and $40 of the decrease because of the decision to stop smoking.
           (d) The