Speaking to ifa, Mr Clark said that with all the differing opinions about how the details of the reforms should be laid out, he was concerned the relationship between advisers and insurers will “fracture”.
“We need to have debate to find the right answers and [answers that are] healthy [for the industry],” Mr Clark said.
“The one thing that we can’t have in debate, particularly between the advice community and the life insurers, is a fracturing of that relationship.
“When advisers and insurers work together – and they work well together – the proposition to the customer is a powerful one, and if [that relationship fractures] and [they] are not working close together [that] won’t be helpful, and I remain concerned about that.”
During the discussions about industry reform and leading up to the announcements by Assistant Treasurer Josh Frydenberg, Mr Clark said TAL wanted to ensure a “prosperous and thriving financial advice industry”.
“We didn’t want to see an industry which would be materially smaller than what it is today,” he said.
However, Mr Clark added that some changes did need to occur.
“Overall, in terms of the final framework that Mr Frydenberg announced, there were some common themes in there in terms of how we were thinking about the situation,” he said.
“As an example, we were supporting commission structures around the order that [Mr Frydenberg] announced recently.”
Mr Clark added that TAL spoke to many advisers across a number of channels when preparing its submission.
“We talked with advisers within our own licensee, Affinia, and we talked to our adviser relationships and licensees that are not part of the TAL family and all those views are relevant to us and helped form our own views,” he said.
“TAL is a business which I suppose culturally has partnering as one of its core values in terms of partnering with advisers.”
“So we took a lot of input from the market both in terms of reform and remuneration models and a lot of things we need to be doing in our own business as well,” Mr Clark said.
Alka-Seltzer is the answer just ask Affinia Bret
Advisers are price takers and all current commission structures, levels and responsibility periods have been directed by insurance companies, trying to compete with eachother for customers. Because it’s easier to sell insurance to someone who is already insured (take over terms).
I’d love to hear the police commissioner say:
-The problem is with the drug users, we have to stop them. The drug dealers are simply trying to make a living…
Where are the conditions on life companies to not penalise current policy holders to be able to offer lower, unsustainable rates to new customers?
Only last year, I did a level premium term quote with TAL for a 39 yr old male. I was surprised to find out that it was cheaper than the client’s current TAL level premium term contract that had been in force for 4 years!
I asked TAL to please move my client to the new cheaper contract, without any commission being paid (except reduce my on-going in line with new premium) only to be told that he had to go through underwriting and full application, for which work I would receive no compensation..
How many loyal clients have been paying their premiums for 15 and 20 years, only to be priced out of their current policies and received none of the new “fandangled” benefits designed to “rate well” on comparator software?
How can insurance companies be allowed to continue to send BDMs through adviser doors on a weekly basis, asking the advisers to move their client policies for a $10 saving?
Insurance companies have set current level and hybrid commission levels because they are deemed to be profitable. If a longer responsibility period would solve the longevity issue, why also lower the commission rate?
Insurance companies set the market and provide contracts to clients. How can this whole reform ask nothing of them?
Go to the TAL home page and on the bottom left hand side it states:
“4 ways to get life insurance”.
The first option on the list is:
“Directly from us”.
Second on the list is:
“Through an adviser”.
If that represents a core value in regard to a valuable and meaningful partnership, it seems more like having a long term affair with a cheap and nasty bit on the side and still telling your partner you love and respect them.
TAL, your losses on Group TPD when trying to win market share (i.e. an industry fund who shall remain unnamed) have contributed to the current ‘unprofitable’ environment for insurers under which APRA is taking your side against advisers.
Also, as mentioned by other bloggers, your direct insurance arm will continue to do just fine while retail comes under pressure. Not sure how well the end buyers of the direct product will be doing though.
Too bad ASIC didn’t think of doing a survey of consumer outcomes (i.e. % claims paid vs total policies held, etc) of Group v Retail v Direct. I wonder why.
tal are in great spot, huge in direct space.
NIb/Virgin/Insuranceline to name a few.
Unfortunately talking to advisers was not the issue – Brett needed to LISTEN to the answers. Something most good advisers know all to well.
The only positive result that will come out of the ‘FSC’ initiated reforms (lets stop hiding the FSC behind Trowbridge)will be the recognition that advisers need to avoid outsourcing their lobbying to the vested interests.
TAL has one of the largest direct marketing insurance businesses in Australia and those consumers are largely ill advised, underinsured and, based on direct insurance statistics, have only a 50% chance of being paid at claim time.
This is not a group that is philosophically aligned with the IFA risk community but really no life insurance company is. They are aligned to generating profits for their shareholders and they have achieved a fantastic result here by substantially reducing their costs of distribution with absolutely no impact on their business – woops sorry, I forgot – they have to agree a ‘Code of Conduct’ and design a new PDS, but the great bit for them is premiums don’t have to change…
I would hope the ‘fracturing’ of adviser relationships is keeping life company boards up at night, but there is a good chance the only reason they are losing sleep is all the celebrating and back slapping they are wallowing in.
Brett, unfortunately the fracture is here and real… how long will it take to rebuild the insurer / adviser trust is up to you and your fellow CEO’s
How could an independent financial planner trust the life insurance companies ever again? Unlike the media and politicians, we know what is going on and we see straight through the lies, spin, and half truths. The whole debate around churn was always a sham. Their real intention has always been to cut commissions so they can hurt independents in favour of their own in-house advisers. Perversely, it was poor advice from advisers employed by the big institutions that gave them the mandate to create the LIF. It is sad that we have a regulatory body which is so inept that they have stood by, and indeed facilitated, this rotten, anticompetitive behaviour.
The ASIC Report 413 found that the advice success rate using commission structures other than Upfront,
(ie.EXISTING HYBRID AND/OR LEVEL COMMISSION MODELS)was 93%.
There was NO evidence produced from this report that suggested the quality of advice provided would improve beyond a 93% pass rate if in fact the commission models used were any less than the CURRENT alternatives to the Upfront models.
Therefore, if the insurers are genuinely focussed on the delivery of quality advice to the consumer and better consumer outcomes, it makes a mockery of those insurers who recommended anything less than the current Hybrid and Level models because they do not have any documented evidence to justify their reasoning.
If the current Hybrid and Level commission models were adopted,the insurers would still be able to increase profits through eliminating the cost of the existing Upfront commissions and implement business efficiencies and policy replacement monitoring systems to control business inflows of offending or deliberate churning advisers.
Aren’t the insurers satisfied with a 93% advice success rate provided to their policyholders, ensuring they are educated, knowledgeable and a long term client?
Long term client’s mean profitable business for all concerned.
Or is it a deliberate and structured manipulation of small business for the primary goal of maximising shareholder return and profit?
Brad, you [ and the rest of the Insurance Companies CEO’s ] are a joke, you tell us that you want a thriving advice Industry, yet you slash the remuneration for our efforts and then impose an unworkable claw back regime. The only people these so called reforms assist is your bottom line, so don’t play the moderators role when you are part of the problem.
Why don’t you and the other CEO’s lead by example, take a 50% pay cut and then if your performance is not up to standard within 3 years refund your salary package.
Hi Brett and TAL, the fracture will be a terminal one if level risk comms drop below 30% come 2016. Other life insurers take note. If you want a sustainable risk adviser panel make sure we can open our doors. I currently write stepped, hybrid and level risk comms. I fear for THE OTHER 80% OF THE RISK WRITERS.
AIA & TAL know without the sales army of the big 5 have they will lose market share in the retail market so have to try be friends with the people they just knifed in the back.
For letting the perception that their profitability issues are all advisers fault and trying to price collude in the name of better advice they deserve what they get.
Prediction.
They will lose retail market share and
continue to get hammered by lapses and claims in the group & direct market.
Serious Question: I write hybrid (85/20) for pretty well all of my policies. Is anyone seriously considering writing up front for the rest of this year to offset the reduction in income endured in years to come?
Not poking the tiger, just interested in the responses.
I know I am considering it. Particularly with the uncertainty of clawback (3).
What does supporting commission structures “around the order” that Frydenberg announce recently actually mean ?
The advisers want and have a right to know which insurers wanted nil commission payments, which insurers wanted 20% level only and the Trowbridge model, which insurers recommended and agreed to the proposed Life Insurance Framework model of the eventual 60/20 and which insurers either did not want any change at all or supported a Hybrid and Level commission model of 80/20 and 30/30 respectively.
For insurers to be concerned about a fracturing of the relationship with advisers now is the same as Donald Trump apologising to the Mexicans.
Don’t stab advisers in the back and then say sorry.
It would be interesting if Brett Clark would reveal the exact number of the advisers within Affinia and the non
TAL-owned licensee advisers that TAL talked with before formulating their submission who agreed that reducing commissions to a lower level than the current Hybrid and Level commission models and putting in place an unjust, unfair and unworkable 3 year clawback provision was acceptable by them!
Brett’s right in that there needs to be a debate regarding the right answers that are healthy for all concerned and this means the proposed Life Insurance Framework must be put on hold until the depth of the unintended consequences and the future damage to the advisers, industry and the consumer is rectified.
The advisers rightly and justifiably feel they have been ignored, compromised and manipulated by some of the insurers who are also controlled by corporate forces.
If insurers want to ensure a strong relationship with quality advisers continues, it is time therefore to listen to the logic and sensible changes advisers are prepared to accept to ensure a healthy and sustainable future for all, especially the consumer and their continued ability to access high quality, affordable and personalised advice.
How can this issue possibly leave our relationships intact? The life insurance companies are colluding and conspiring against independent financial planners. It was revealed to a large audience of advisers last week, by an executive from one of the bank owned life insurance companies, that his firm was considering a reduction in level commissions and that 2 other life insurance companies were ‘pushing’ for a reduction in level commissions across the market. They have no mandate for such a move. They shouldn’t even be having these conversations. Furthermore, the ASIC report suggested level commissions were associated with the best quality advice and they clearly wouldn’t result in churning. Where is ASIC and the ACCC on this issue? Independent financial planners should not be bullied and treated with such contempt. There is no excuse.
“So we took a lot of input from the market both in terms of reform and remuneration models and a lot of things we need to be doing in our own business as well,”
And then we decided that we should do what’s best for TAL…