AIOFP executive director Peter Johnston has presented measures that the association believes would repair the damage wrought by the Life Insurance Framework.
“We are currently witnessing the demise of the once almighty life insurance industry in Australia, unless rescued by government policy intervention there will be further widespread severe negative connotations and outcomes for consumers, taxpayers and the nation’s financial position,” Mr Johnston said.
In line with the AIOFP’s position of returning to a pre-LIF environment to encourage retail policy sales to consumers, its proposals for change are:
- Retain and increase the commission levels back to a capped 80 to 100/15 to 20 per cent configuration.
- Advisers give consumers a choice of a transparent commission and a fee-for-service payment option — let them decide what they want.
- The compliance impost is reduced to eliminate unnecessary costs and duplication.
- The FASEA exam is immediately restructured to eliminate the ambiguity intent and focus content on relevant risk advice capability.
- An amnesty period is given to risk advisers who exited over the past three years to re-sit a revamped exam to immediately re-enter the industry.
“The Life Insurance Framework is arguably the most destructive consumer legislation ever passed through Federal Parliament,” Mr Johnston said.
“We believe it was not a case of unintelligent politicians making mistakes but the first stage of a deliberate strategy to remove financial advisers from the consumer relationship. It has worked exceedingly well with around 50 per cent of the advice community leaving but unfortunately, 30 advisers have committed suicide over the cruel impositions.
“The AIOFP has contended from the outset that the LIF, FASEA and a ban on grandfathered revenue legislation was designed to starve, embarrass and intimidate advisers out of the industry, few now disagree with this position.”
The reduction of commission that came with LIF is central to the AIOFP’s recommendations, particularly when combined with the additional compliance obligations, which Mr Johnston added has resulted in many risk advisers unable to afford to remain in business.
“The LIF reduction in commission from 120 per cent to 60 per cent and the ridiculous impost of compliance has made it uneconomic for most risk advisers to sustain a business model. The circa 50 per cent resultant drop in retail inflows has starved life companies of new capital into their insurance pools ironically causing consumer premiums to increase by circa 50 per cent,” he said.
“A key element to this debate [is] consumers overwhelmingly want a commission structure in place to pay for their cover. We recommend advisers giving consumers a choice of a fee for service or commission option to select from — let them decide, not some Canberra bureaucrat with a flawed philosophical view.”
In November, the AIOFP addressed an open letter to Quality of Advice Review lead Michelle Levy arguing against the return of banks to financial advice.
According to Mr Johnston, the banks should stay out of advice “of any description” and stick to what they do best — “standard banking, administration, management activities”.
I have been with a f a for thirty years and have never thanked me for my length of time with them ex advisor won’t mention his name told a f a he had enough he rejoined he was welcomed back and recieved his certificate telling everyone how long he had been a member I rang twice and asked we’re was my certicate stating how long I had been a member never got a reply message I won’t waste my time anymore it’s run by a clique
The reason why the FPA and AFA are quiet is because they and their joined at the hip Institutionally aligned FSC, all collaborated with Minister O’Dywer to put LIF through Parliament. Might as well throw the FSC into the FPA/AFA merger, they all deserve each other….no wonder the Life Insurers moved away from the FSC and formed CALI.
Dear o dear – we want to live in the past again Peter . Who pays for the increase in commission ? Yes the client via premiums that are already out of the reach of many. This will exacerbate the under insurance problem not improve it. Yes the compliance burden should be lessened but change will happen dont ask for the clock to be wound back.
Building the insurance pool would result in a better outcome in terms of premiums, so if that means incentivising advisers to return to Risk and write more policies then I think thats a better outcome.
Excellently put.
AIOFP is definately the association fighting for the rights of advisrs. Bye bye AFA/FPA.
Thanks Peter for publicly saying what us who work extensively in this side of the business believe in. AFA and FPA you have been embarrassingly quiet. These measures would enable our businesses to beef up with additional staff and tackle the real issue UNDER INSURANCE
Thank you AIOFP for continuing to stand up for advisers. I used to write a lot of risk insurance but do hardly any these days as I agree it is too compliance heavy, underwriting has become tighter and there is just no guarantee of even getting the paltry 60% commission anymore. I say congratulations to the FSC & Senator Jane Hume for crippling the life industry by reducing new premium inflow. A BDM told me just before Christmas that they have experienced a 75% reduction in new business inflow, causing them to have to consider increasing premiums. I am also seeing clients that hold legacy policies, paying way more in premiums than they would if they had the insurers on sale product. What the hell is going on?
Max, good point about the discounts for new clients, when existing clients get no discount. I’ve told a few life companies that I’m not interested in dealing with them anymore if they keep ripping off existing clients to fund new business. Loyalty goes both ways and life company’s lack of it in this way incentivises churning.
They all are behaving with contempt so where do we place clients insurance ?