Document ID: chunk:federal_register_of_legislation:F2017L00636:body:0:p3
Version: federal_register_of_legislation:F2017L00636
Segment Type: other
Provision Reference: 
Character Range: 4963–7552

of $250 per year, but the client initiated increase occured 292 days into a year, the increase in the policy cost for that year would be $50 (since there would be 73 days remaining in the year): see subsection 963B(3B) of the Act. The acceptable benefit ratio applying in relation to the $50 increase would be (0.6 ×365)/73 = 3.0. Consequently, a benefit of up to $150 could be given in relation to the increase: see subsections 963B(3A) and 963BA(1) of the Act.
Benefit given because of a client initiated increase in the previous year—20% cap
(5) An acceptable benefit ratio for a benefit that is given:
           (a) for a year during which the product is continued; and
           (b)  because of a client initiated increase in the previous year;
is the amount worked out using the following formula:
           0.2  relevant days in year
           days in year
where:
days in year means the number of days in the year.
relevant days in year means the number of days from 12 months after the client initiated increase until the end of the year.
           Note:  If a client initiated increase occurs part way through a year, subsection (5) allows a trailing benefit of up to 20% to be paid for the following year in relation to the period from the anniversary of the increase until the end of that following year. In subsequent years, subsection (3) allows a trailing benefit of up to 20% to be paid.
       Note 1: The following are examples of how the value of the acceptable benefit ratio is worked out:
           (a) A life risk insurance product is issued to the holder on 31 December 2020 with a policy cost for the year of $1,000. An acceptable benefit ratio for a benefit provided to a financial services licensee, or a representative of a licensee, for the initial 12 month period is 0.6: subsection (2). Accordingly, the benefit ratio requirement in subsection 963BA(1) of the Act will be satisfied for this period if the benefit provided to the licensee or representative for the period is no more than $600.
           (b) The holder decides to continue the product into 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 and the remaining $50 because of a CPI increase to the sum insured. The $150 is a client initiated increase and an acceptable benefit ratio of 0.6 applies for a benefit provided for the second year in relation to the $150 increase: subsection (4). Therefore, a benefit of up to $90 may be given in relation to