In a statement issued yesterday, FPA said it has sent its members a “life insurance blueprint” for consultation, which consists of 10 areas of reform for the industry, with a strong focus on adviser remuneration.
“The [life insurance blueprint] is based on conversations with the board and members to date, and seeks to further collaborate with members on key matters,” FPA chief executive Mark Rantall said.
“The FPA wants sustainable change in the life risk sector through higher professional standards and by improving the public perception of the life risk advice service offering.
The form of regulation proposed in the FSI final report would only serve to benefit life insurance providers and potentially push more Australians away from life insurance coverage due to the failure of addressing the real structural issues within the industry,” he said.
Of the 10 points in the ‘blueprint’, the FPA said “commissions need to be initially higher” to reflect the costs of advisers providing initial advice and implementing cover.
“A lower ongoing commission allows consumers to access review advice and encourages retention of policies – it is our view that the upfront work is often four times more than annual reviews,” the statement said.
“Therefore an upfront payment capped at four times the ongoing commission payment would be appropriate.”
The FPA also added that as part of an “effective commission mode” advisers should be partly responsible for the ongoing retention of the policy.
“[Therefore] we propose that commissions be able to be reversed for up to the first two years of a new policy,” the statement said.
The FPA also put to its members that in order to “promote fee-for-service” for insurance, life insurance companies should be required to develop options for advisers to “dial down” from product commission and “dial in a separately identified adviser fee”.
Among its proposals the FPA also argued that there should be a ban on “other forms of conflicted remuneration” which include volume-based payments, rebates, profit-sharing and shelf-space fees.
Does this effectively mean that the FPA is supporting the “hybrid” model, similar to that recently announced by AMP (80% year 1, ongoing 20%)? And the FPA does not support what most would consider the current “upfront” model (typically say 120%/10%)?
Maybe the FPA could fund new advisers into the industry? Not sure how they will survive otherwise, as Roger Smith said still do not see any ques of people lined up to purchase Life/Trauma,IPP , it has been sold by advisers as far back as I can remember. The focus need to move away from commissions I agree but lets get people at the coal face involved in some of the discussions, not those that have never ever sat face to face with a prospective client or hand delivered a claim cheque !1
Rod magill