There are many reasons why a royal commission into banking and financial services would be a waste of public funds and time. One of the most compelling is that Australia’s $44 billion life insurance sector is part-way through its biggest reform agenda for decades.
The advocates for a royal commission will never admit it, but the industry and parliament are already working on seismic reforms across the financial services sector.
Life insurance is a major part of an industry which has been subject to unrelenting scrutiny – 15 major inquiries – over the past decade, at a cost of nearly $3 billion, ultimately borne by consumers.
We need to stop the cycle of endless inquiries and collective amnesia and get on with the job of concluding the reforms recommended by David Murray’s Financial System Inquiry, the various bipartisan parliamentary reports and the landmark Trowbridge review of life insurance.
The reforms under way for life insurance and financial advice are significant.
The life insurance industry is developing a code of practice, as recommended by Trowbridge, due to be launched in October. This will be mandatory for all insurance companies that are members of the Financial Services Council – which covers 99 per cent of all premiums in the market – by next July.
Out for public consultation, the code is the industry’s commitment to strengthen community trust and confidence in life insurance, which is one of the most important financial protections a person can obtain. The code will include timetables for decisions, standard disclosures, medical definitions and a transparent governance regime.
In addition, the way advisers are paid for selling life insurance will change if a new bill gets through parliament. Under the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016, which will cap upfront commissions to a maximum of 60 per cent of the first year’s premiums as broadly recommended by Trowbridge and Murray, bringing the sector more in line with all other financial advisers who operate under a fee-for-service model.
However, while these reforms will improve the delivery of life insurance products and services for consumers, some critical issues remain.
Most Australians access their life insurance through a “group” superannuation policy accessed through their workplace which is inexpensive and provides broad coverage. Group life insurance is the risk protection most Australians rely on to protect their lives and livelihoods. It is an integral part of our world-leading superannuation system and means that millions of Australians are covered for death and disability through their super, cover they might not otherwise have.
Right now, under the group superannuation life system, there are significant barriers to people getting back to work after illness or accident, which need to be urgently changed.
Specifically, life insurers cannot make targeted rehabilitation payments for medical treatment or therapy that they determine to be relevant, appropriate and necessary to return the claimant to work.
At the moment, only a health insurer or Medicare can make a rehabilitation payment. Insurers are prevented from acting in the best interest of their clients.
These restrictions must be removed so life insurers can assist people back to work earlier by offering rehabilitation benefits. This would markedly increase an injured person’s probability of successful rehabilitation relative to the status quo.
Cost of life insurance premiums within group superannuation funds is another issue which must fixed.
In the past five years, there has been a significant increase in claims for TPD (Total and Permanent Disability) in group superannuation funds, and the time taken for people to lodge these claims has been getting longer. Because there is no time limit on claims, people are able to claim for something that may have happened decades before.
Because of the increase in both number of claims and the fact that there is no limit to time taken to lodge a claim, insurance companies can find it difficult to form a clear actuarial and pricing assessment. Over this similar time period, this has contributed to increases in premiums.
We need new laws to mandate a reasonable notification period for claims. This would assist life insurance companies to better manage price volatility.
A royal commission into financial services would derail overdue reforms to life insurance and financial advice. A 16th review, inquiry or commission is unnecessary. You cannot simultaneously hold a royal commission and proceed with structural reforms. It’s time for action, not Sir Humphrey and more reviews.
Sally Loane is chief executive of the Financial Services Council. This article originally appeared in The Australian Financial Review.
Paul C, I fully concur, the article is clearly a sandwich board for the FSC. This does not correctly reflect the industry.
Nice work ‘Old Risky’. Great points raised that coincidentally, are never raised or discussed in the media or understood by that moron John Trowbridge who was clearly paid for his comments.
Needless to say – no response from Sally yet hah???
Wowee….just checked back into the article after registering the first comment to see what others thought. I’m staggered (but pleased) to see NOT one comment IN FAVOUR of Sally’s opinion on this very emotional issue.
The fight’s not over fellow advisers…excuse the theatrics but it reminds me of a very famous (slightly amended) speech…
Risk Advisers Fighting To Save Our Industry: “We all end up dead, it’s just a question of how and why. Every man dies, not every man really lives. I am ‘a passionate risk insurance adviser! And I see a whole army of ‘fellow advisers’, here in defiance of tyranny. You’ve come to fight as ‘passionate honest consumer focused advisers’… and ‘free men and women performing that privilege’ you are. What will you do with that ‘privilege’? Will you fight?
FSC / Banks: Fight? Against that? No! We will ‘manipulate the system and lie to the media, the government and gullible consumers instead so we can make more money. And we will live that way.
William Wallace (HONEST Risk Insurance Advisers): Aye, manipulate the system and lie to the media, the government and gullible consumers instead and you may make more money and you’ll live… at least a while. And while consumers are left exposed to your wicked ways, dying in their beds, failing to receive good quality advice and getting no assistance with their claims many years from now, would you be willin’ to trade ALL your wicked wealth, from this day to that, for one chance, just one chance, to do the right thing and tell people the truth, to tell consumers what your focus really is – to take away honest risk insurance advisers FREEDOM!
(ADVISERS and LET DOWN AFA MEMBERS): (Cheers)
(HONEST Risk Insurance Advisers): Go back to the Government, the Life Insurance Companies, the FSC and the banks it represents and tell them Australia’s honest risk insurance advisers and their daughters and sons are yours no more. Tell them ‘will be’ free ‘of the your tyranny and deceit.
Sally I see you’ve been very active this week. This same article appeared in Mondays AFR. Is also very evident that you’ve been providing background briefings to a number of journalists in industry email newsletters-there is an obvious common theme to them that LIF must go ahead immediately and the FSC is seeking to pressure government. Is
But let’s put that to a side for one moment. You would think, according to this Risk Adviser fluff piece, that group super insurance is wonderful, and is “inexpensive and provides broad coverage”, whatever that means, considering the funds can only offer death, a very restrictive TPD benefit and a very restrictive income protection benefit, as dictated by the SIS Act. As other commentators have noted below, advisers know differently about “inexpensive” . Acting on our client’s best interest as we have always done (something that fund trustees seem to want to avoid), we compare what’s in the industry super fund brochures, with what we can obtain in retail, and surprisingly for you Sally at least, often from the very same insurer. Imagine !!! And what’s more, the insured the retail insurance we recommend cannot be cancelled, or have its terms and conditions altered in any way, at the whim of a trustee.
There here is another issue for you given that they never did this in the NRMA or at the various newspapers where you’ve applied your trade. The members of your FSC who sell insurance cover to the trustees of the industry funds, and other public offer funds, will be forced to continue to apply a combination of increasing group premiums and tighten definitions. They will continue to do that because the industry funds insist on offering DEFAULT death and TPD insurance cover to new members. Hence your rather uneducated comments about changing lump sum TPD payments from super to drip fed “rehabilitation ” payments hoping the claimant will die in the meantime are an insult to the members of those funds who thought they were paying for some genuine disablement lump sum cover, .
Here is a challenge. Pick out one of your FSC members, who dabbles in group insurance cover for industry and other not for profit funds, (say Comminsure, TAL or even MLC) , and ask them how much cheaper those premiums would be in the industry super funds if the industry super funds were not permitted to offer DEFAULT cover without giving the insurer the opportunity to assess AND PRICE the individual risk. In the real insurance world we know that process as “underwriting” but I suspect you have not got to that part in the Briefing Book they handed you when you joined the FSC. You may be surprised by the answer you get, but in any event you should take the lesson- group insurance premiums WILL REDUCE if un- assessable default cover is no longer part of the parcel.
And speaking of lessons, perhaps you might like to ask one of your staff to pull out FSC Guideline 11, which covers the transition arrangements that come into place when an industry fund changes insurers. One of the issues covered in FSC Guidelines 11 is what happens to an existing fund Member’s Default cover when that member is not “at work “on the day (of which he has not been informed) the fund switches to the new insurer. And when you read that Guideline 11 you will notice that there is a period of grace for our Member to return to work and retain his Default cover. That’s nice if you’re in a regular full-time paying job, your employer pays his SGC contributions on time and and our member has had five days off for the flu, the period of which just happened to contain the date your fund switched insurer.
But if you’re a casual worker, or your employer is one of those many employers who are not on time with the SGC contributions, your cover could be declared null and void on that day the insurance was switched by the trustee. This member could discover a real problem if he comes to make say a TPD claim down the track.
We understand that a trustee of a certain very large union-sourced industry super fund recently refused to pass on to a disabled member a TPD benefit of $58,000, which had been approved by the new insurer and referred back to the trustee. It appears our trustee, after receiving the $58,000, went back and checked with the employer as to whether or not our member was actually at work on the day the insurance was changed or, if he was not at work on that particular date, had subsequently met the ten-day criteria. Whatever happened, we believe that the $58,000 was not passed on to the member.
You see Sally as advisers we come across this sort of rubbish every day from not for profit funds and their insurers and some of us spend a lot of time with these desperate people, working for very little fee or acting pro bono, helping the client get paid his appropriate insurance payout and ensuring that those who have been refused their entitlement to reasonable justice in their insurance claims can obtain the funds they need for their care. We are a damn side a lot less expensive than plaintiff lawyers.
And we will be revealing more of these group cover claims horror stories in the next few months so that the public can really understand that insurance, as packaged by one of your FSC insurer members, and held within a not for profit superfund fund is not necessarily the “set and forget ” solution as promoted by vested interests .
Clearly not a truly informed person for the role she holds. Her interpretations are some what so far from reality. Its a real shame she cannot focus on the real issues and work to the consumers benefit
The Financial Services Council’s mission is to represent the interests of our
members, our members’ clients and customers, all investors and superannuation
fund members, life insurance policy holders, users of financial advice and
trustee services.
We will do this by continuously engaging in advocacy concerning the
development of the social, economic and regulatory framework in which our
members operate, thereby helping them to better serve their clients and
customers.
The Financial Services Council is committed to:
being open, transparent, and collaborative;
encouraging ethical and equitable behaviour by members through the
development of industry standards;
negotiating the creation of efficient regulatory regimes; and
creating “level playing fields†and competitive markets.
Our
Objectives
The members of the Financial Services Council – Australia’s leading wealth
managers – exist to achieve three outcomes for Australians:
1. To increase their wealth;
2. To protect their lives; and
3. To provide them with a comfortable retirement.
Our
Approach
As the largest sector in the Australian economy – responsible for managing
the savings of all working Australians and facilitating investment in all
industries, we have an obligation to speak out on macro-economic policy
issues.
Our
Priorities
1. Working to improve the well being of all Australians;
2. Promoting financial adequacy for all Australians;
3. Increasing consumer confidence in the industry;
4. Promoting efficiency, integrity & good regulation; and
5. Continuing to improve the professionalism and success of FSC and its
Members.
FAIL…FAIL….FAIL – Sally – You Really should have a read of this!!
Sally here is where you are totally out of touch and disrespectful to the Australian people around “Group Insurance through Superannuation.” You see this was the very issue bought to light by Adele Ferguson’s story this year and the way that a FSC member Comminsure handled the claim. Without “Advised Insurance” these consumers were left to fend for themselves with no assistance at all. Under the LIF, which you are promoting, these types of stories will become the norm..Shame on you Sally Shame.
Having had some experience in the political sphere – this rather shrill and desperate article by the Spokesperson of the Australian Financial Cartel tells me one thing.
The FSC is utterly terrified at the prospect of a Banking Royal Commission and the inevitable uncovering of the dodgy, self-serving and reprehensible behaviour of its members on the long-suffering consumer. Oh, and they won’t be able to sheet the entire blame (as they have successfully done for the past few years) on a few ‘rogue’ advisers.
I think they also realise that the AFA may be forced to withdraw it’s support for the LIF once the EGM is held and that will weaken their position even further
Sally and Co know that the only way they can ‘restructure’ the insurance sector to benefit them and their members, alone – to the detriment of IFAs and consumers – is to have the LIF rammed through Parliament as quickly as possible. Look, a bear!!
I never thought I’d say this, but a few Senators I hold in contempt have the chance to save the IFA Risk sector by forcing a RC.
Maybe the FSC should just accept the writing is on the wall and instead turn their attention to ensuring the Industry Super Fund sector gets dragged into the RC to expose the double-standards that apply to them in terms of Opt-In, FDS & financial reporting requirements. How much did the ISF sector (and therefore their members) pay for all those ads during the Olympics?
Give it up Sally. You have tried, but failed, to destroy the ISA Risk sector (with the assistance of the AFA) through the shonky LIF process.
Like the saying goes, you can fool some of the people some of the time, but not all of the people all of the time.
This article reminds me of a Donald Trump speech. Let’s see how much inaccurate, sensationalised dribble we can get out in one article and see if it sticks in the minds of gullible and impressionable folk who might believe it. Probably posted on the wrong site for that Sally, this is not the Herald Sun website. Shame Sally, shame. Sounds like you are scared to be uncovered as the Profit Grabbing Ghouls that FSC members are.
Bring on a Royal Commission and let’s get an unbiased view of the problems in this industry.
Sally – you have been hounded by both advisers and press to publicly state one single benefit of the LIF for customers. You totally ignore doing this because the truth is you cannot. You and the FSC have become a disgrace. You are nothing more than a profit mongering cartel and to hell with the clients. Nothing you say can ever be taken seriously again.
A Royal commission is becoming a must do with your total lack of scruples.
What a crock of s%^y, from you article is is obvious you have absolutely no idea
Sally, your lack of any experience in this industry becomes more apparent each and every time you put pen to paper. I am at a loss as to why you have melded reforms needed for Group Cover with those of Individual Cover provided via the retail market.
While I agree with what you say about:
– the reforms required for Group Cover including statutes of limitation on claim times and the ability for the member to claim whenever they please and,
– “stopping the cycle of endless inquiries and collective amnesia….”
I am at a loss as to exactly what this has to do with:
1. Retail Cover, the way in which advisors are remunerated,
2. “Trowbridge and Murray, bringing the sector more in line with all other financial advisers who operate under a fee-for-service model”.
Regarding the 2nd point: we know Trowbridge completed his lightweight and conflicted report under influence of certain members of the FSC in conversations which took place behind closed doors, but did Murray really agree to this? Or did you throw this in the statement for impact?
Further, I would love to see the numbers supporting who “ALL OTHER FINANCIAL ADVISERS WHO OPERATE UNDER A FEE-FOR-SERVICE MODEL”. As a percentage of the industry, I would guess the number of advisors providing insurance advice on a fee-for-service basis would be negligible, so please, stop spouting spurious statements like this one – your journalistic experience from The Sun is shining through – why spoil a good story for a few facts…..
For someone who is actually from the industry, I make the following points:
1. Based on conversations I have on a daily basis with clients, friends, family, work colleagues etc etc – literally nobody has a clue about their group entitlements let alone whether or not they even have cover. There is apathy from the consumers and a requirement for education on insurance and what is adequate cover to be provided over and above what they have/if they have any at all.
2. Who is to provide this advice and education? The banks?
3. Based on the fact that half the population is either self employed/employed by a small business, this leaves half the population either uninsured or not eligible for membership of a group scheme.(source:http://www.abs.gov.au/websited…,
Adequate insurance needs to be sold. End of story. Virtually nobody will come along and buy it off their own back. The people providing this service need to be remunerated adequately for their time and the risk they take to go into this industry. Group schemes are good for only half the population, assuming their employer has the numbers to be eligible and if they stay with that employer/scheme for the long term. You need to cease mixing the 2: Group and Retail are not the same.
Sally your concern for the LIF legislation is touching and also your concern for a royal commission into all your buddies from the board of the fsc is sweet but it is time the banks were accountable and stops the buck passing back on to advisers for anything that happens, most cases the banks were aparty to all the problems and if not were encouraging them.
The royal commission might also uncover the real connection between the banks and the fsc which is only a lobby group to try and remove advisers who made the insurance industry the 50 billion dollar economy all on it own. So yes Royal Commission come on down and sort out all this Cartel that rules Australia
group insurance is “inexpensive”. Your complete lack of knowledge on that single subject indicates you have absolutely NO understanding of the industry. You should have YOUR wages clawed back.
Sally Loane is chief executive of the Financial Services Council.
Hah! Say no more….!
You have no idea what your talking about, some one gave you key words to write a 20 dollar article . Go interview real people in the industry and stop assuming industry super funds insurance is cheap and good for clients . “Inexpensive blah”