Following the federal government’s formal response to the Financial System Inquiry last month, FSC chief executive Sally Loane said the government’s decision to move forward to the LIF will “substantially benefit consumers”.
Now echoing this sentiment, ASIC said the reforms will achieve the objectives of ASIC Report 413 which called for an improvement in the quality of advice and better outcomes for consumers.
“We are focused on ensuring consumers have trust and confidence in the life insurance sector,” ASIC senior executive leader of corporate affairs Matthew Abbott said.
“Our report found the sector needs reform and the government has presented a reform plan which we are confident will deliver these benefits,” he said.
A number of advisers have highlighted their concerns about the effects a three-year clawback policy – as proposed within the framework – will have on their best interest duties as enforced by the FOFA legislation.
When this was put to ASIC, however, Mr Abbott referred to his previous comment in which he argued the reforms will benefit consumers.
Previously speaking to Risk Adviser, AFA chief executive Brad Fox refuted the claims made by Ms Loane, and argued that the Life Insurance Framework will lead to consumers paying more for advice.
“This increases the barriers to Australians getting the insurance cover that they need,” Mr Fox said.
A recent survey, conducted by a collective of advisers and dealer groups, found many believe the reforms will have negative effects for consumers and will also hinder their ability to service them in accordance with the FOFA legislation.
GAA I will tell them we no longer provide risk insurance advice as it is no longer profitable for us to do so due to decisions made by the FSC in collaboration with the government.
Hardly a surprise that ASIC and the FSC are united – it was after all a joint proposal (in effect if not in name) that they put to Trowbridge and Trowbridge went for it hook line and sinker.
It’s also not in the clients interest for their adviser to go broke writing business for a payment that Trowbridge admitted wouldn’t cover costs.
I don’t do general insurance because I would lose money on it – that is also likely to apply to life insurance.
If ASIC enforced the current FOFA legislation namely the Best Interest duties there would be no need to continue to look for magic bullets to solve problems like churning. The reality is these magic bullets are a smoke screen for the insurance companies and banks who will manage to dramatically decrease the size of the independent adviser ranks with these changes.
So tell me what are you going to tell your new clients who need risk protection after the 1/7/2016? Sorry, but I’m refusing to write any new risk cover for my clients? I don’t believe that would be in the clients best interests and anyway I really don’t think the FSC insurance company execs would be too concerned by reduced risk inflows by your stance when they have highly diversified billion dollar profit making businesses. It may not have been the best outcome but it is workable, we need to adapt our business models and processes and get on with business just like we have in the past with FSR and FoFA etc.
The adviser army are unified on one thing…Not writing any more new risk business after 1/7/16 unless clawbacks remain at one year at which time the FSC insurance company executives can look forward to watching their risk inflows and associated bonuses head south. ADVISERS UNITED WILL NEVER BE DEFEATED.
No, we don’t. So please enlighten us… I’m a bank planner and I have several insurers which I routinely use depending on the suitability for the client. Please feel free to join us in the realm of the ‘best interests duty’ rather than promoting outdated fallacies.
ASIC Report 413 was designed to achieve a set result, which it did by saying that upfront commissions are out of line with expectations. Without getting into concerns over whether the report was valid it also showed that Hybrid commission had a high compliance pass mark, as did level premium structures. The only reason to move beyond the current Hybrid level is to provide a short term boost to insurance companies profits, which will be eaten up by them not improving efficiencies as you don’t make the hard decisions if you can pass the buck (as shown by Australian banks over the years). I have yet to hear an explanation on how the 3 year clawback improves the quality of advice and I for one will be charging an upfront fee for insurance, not providing insurance advice to any non smoker aged less than 35 and lodging credit defaults on people who cancel policies during the 3 year period as ASIC have advised me that everyone can forecast out three years and all lapses are churn.
I think, Roger, that you are putting too much emphasis on the language when the actions and argument tell a different story. Profits and budgets…that is all it is plus a bit of payback from the ISN. Consumers are not even on the radar in reality.
Let’s reduce insurers’ acquisition costs by close to 50%,
couple it with a 3 year write-back facility to increase profitability – and let’s
all increase our premiums to consumers over the past 12 months (and possibly next 12 months also) – and then let’s
put that to the market and call it LIF as it will “substantially benefit
consumers†– that is what the politicians/public want to hear. It beggars belief that there
would be a reasonable politician out there that would actually believe this??
How does the consumer benefit from this? They DON’T!
The substantial benefits will actually be for ASIC and the FSC members as there is no material benefit to consumers.
Costs will not reduce as FSC members moan about the additional costs of Hybrid while gleefully cutting upfront commissions and payments to licensees. Great result for their profitability – nothing for the consumers.
ASIC, through its largely discredited report on the life insurance industry, can continue to divert attention from its appalling track record and lobby for additional funding to support its spiraling inefficiencies.
Quality of advice will remain unchanged but largely didn’t need to. The targeted report that ASIC falsely portrayed as a general report revealed the sub 70 advisers sampled had issues they needed to address. Of course if you ask life companies to provide you with a list of high volume writers who have substantial lapse rates – i.e. those with a record of ‘churn’ then remarkably you will find there is an issue of churn. To expand that finding to encompass the whole industry is either incredibly inept or deliberately deceitful – I would go the latter!
Advisers seem puzzled as to ASICs’ and Peter Kell’s motives but if you are lobbying government for additional funding you need a scape goat and Mr Kell has decided to target advisers as we have no cohesive voice. This allows him to fabricate whatever evidence suits his agenda.
The only benefit the LIF gives is the profit margin for the owners of the Insurance Companies “The Banks”, LIF will wipe out the Independent Financial Advisers and all the consumer will have left is the BANK Adviser and we all know what product they are going to recommend.
Matthew Abbott said nothing, he has no idea, Peter Kell neither, I wonder, its not about the advisers its all about the insurance companies profits and claims. Its only about getting the adviser out and more profit it has nothing to do with trust, the new deputy treasurer also knows this or she at least ought to know it, ever since I’ve been in this industry CPA’s have all complained about the upfront income, when they have a claim they tend to understand, I had a GI claim for a CPA im not even a GI adviser but the CPA wanted help, it took 30 hours 11 months and countless study of case history, legal advise and many hours of consultation the CPA paid me $1,000.00 for my time that’s less that is .001 an hour Mr Fox you have never had risk advisers interest at heart you backed out and stood alongside the FSC and the ASIC so did the FPA you know nothing about this you are not welcome.
Can someone from the FSC or ASIC please let the public know how it will “Substantially Benefit Consumers”. is it to much to have some facts please?
Sally, all we want to know is exactly how the ‘reforms; will substantially benefit consumers, and how that will be measured. No rhetoric, no make-believe, just the facts.
My only comment is IF “ASIC and the FSC are united in the view that the life risk sector needs reform, with the corporate regulator saying that it is “confident†the Life Insurance Framework (LIF) will ensure customers CONTINUE to have “trust and confidence†in the risk sector then there is NO NEED FOR THE REFORMS AT ALL as it is an acknowledgement that the trust and confidence ALREADY EXISTS..