A statement from the company, following an email to the Fortnum adviser network from executive chairman Ray Miles last week, reveals it will adopt a fee-for-service model, with hybrid or level risk commissions from July 1.
The statement said the move comes in a bid to “self-regulate and ward off further legislative attack”, following similar decisions by AMP and Centrepoint Alliance in the wake of the Trowbridge Report.
Mr Miles said that while many of the problems in the life insurance industry are not the fault of advisers, the advice industry has no choice but to implement change.
“Advisers are price takers not price makers. We don’t set the terms for upfront, hybrid or level commissions nor do we set the policy terms or premiums yet most of the blame for the industry’s sustainability issues are directed at the minority of advisers who churn,” he said.
“There are advisers who churn and they’re known to the insurance companies who continue to accept business from them so perhaps part of the problem is how executives are incentivised to deliver new business growth.”
Mr Miles, the former boss of Associated Planners, which later became Genesys, said the whole industry needs to move quickly or face legislation that will make it “difficult for advisers to profitably provide insurance advice” thereby exacerbating the underinsurance problem.
He also called for greater regulatory scrutiny of the group insurance market.
This is in no way a criticism of the decision taken by Fortnum, however, it has become a ridiculous situation that has now developed where licensees are jumping for fear of being pushed.
If this situation was based on appropriately assessed and researched data and non conflicted processes, then it may have some form of justification. The mistruths surrounding the supposed consumer benefits relating to advice quality,pricing, sustainability and underinsurance issues are being driven by forces with an agenda based on profit and shareholder returns.
Twiggy Forest is currently pushing for government to investigate collusion, price fixing and manipulation of markets in the mining of iron ore to gain control. Instead of Josh Frydenberg saying he doesn’t want to be involved,he needs to have a more in depth look at really how this manipulated situation has got to this point.
Probably unlikely when his Chief of Staff is a former FSC Policy Director.