Addressing the FSC Life Insurance Summit on Wednesday, financial services minister Jane Hume said Treasury would now assume responsibility for the LIF review and combine the inquiry with a broader review of the quality of advice that had been a recommendation of commissioner Kenneth Hayne.
“It did seem like there was going to be some duplication of the work done, and I think one of the things that we’ve been trying to do [in the industry] is get some alignment in the work that we’ve been doing,” Ms Hume said.
“It seems silly to have one review on life insurance over at ASIC and another review of the quality of advice over at Treasury, so yes ASIC have already started the data collection on [the LIF review] but that data will now come back to Treasury for analysis.”
Ms Hume said the broader Quality of Advice Review would allow the government to “appropriately consider the full breadth of issues impacting on both the quality and affordability of all forms of advice”.
“As we undertake the Quality of Advice Review, important issues like the degree of underinsurance and maintaining access to affordable and quality advice will be at the forefront of our minds,” she said.
“These elements will enable us to achieve the objective of a thriving life insurance sector that provides access to quality insurance products tailored to meet the needs of Australians and their loved ones at a time when they need it the most.”
Ms Hume added that although it was important that remuneration structures in the advice sector “move closer towards an alignment with other professions”, that did not mean there was no future for commissions in risk advice.
“Not at all – Parliament has continued to allow commissions in life insurance and FASEA itself has acknowledged that commissions are an acceptable form of remuneration,” she said.
“I recognise that a flat fee charged for advice can be a challenging business proposition. Consumers struggle to understand what they’re paying for, they may not have cash to pay up front and advisers need to be paid for the work they do – work that’s fundamental to the proper functioning of the life insurance market.
“The issue with commissions is not their existence, the issue is when they influence the advice that’s given.”
[b]“The issue with commissions is not their existence, the issue is when they influence the advice that’s given.”[/b]
This statement from the Minister Jane Hume is counter productive to what the so called lif review is all about, with every planner receiving the same commission now anyway.
sounds like treasury realised they completely screwed this up , and as a result clients are now paying a premium for the same advice, and the rest receive no advice. Well done.
It sounds like the government has finally woken up to ASIC’s complete incompetence on life insurance? Pity it’s too late
Cool. All we have to do is put up with this for 2 more years, and then they will make it more difficult for individual advisers and better for Industry super funds and clear the way for the banks to get into the robo advice space. Should only be about 5 years until they have completed their mission of completely wiping out the industry.
So if LIF was the wrong solution and should never have been put in at all, do advisers have to wait till 2022 for a bad framework to be unwound?
Great here we go more red tape to wrap the industry up in.
Another enquiry by a bunch of bureaucrats who don’t understand this industry. I’ve had a gut full.
If I had any confidence left in the management of our industry I am not sure how this would affect it. Does Treasury love industry funds as much as ASIC?
not sure of this is a good thing or not… Imagine if labor get in power and they control treasury…
Treasury…well that’s finalized that then…the very same body that reviewed FoFA and openly said we don’t care if there are job losses in this sector and a reduction in financial planners because natural competition and new technology will eventually take it’s place. We may as well cut and paste the response….the very same group of individuals that paid 5% entry fees on contributions and 2.75% ongoing management fees in a crappy AMP product that earned 0.75% over a 15 years and woke up when they were age 53 and are now Senior Officials.
yep, the same ones that are in PSSap, one of the worst performing funds around.
No doubt ASIC will only provide the data that points to the outcome they are looking for
Exactly. Just as they did with LIF and the Royal Commission. The biased bureaucrats at ASIC have far more ability to influence legislative outcomes than our elected politicians do.
I think the LIF review is no longer required. Virtually everyone I have spoken to in Advice has stopped doing insurance, advisers doing risk have quit their jobs and moved on. I think a review would be a waste of money with minimal insurance now being written going forward, I think the government would be better off spending the money on things like fixing the hospital system.
Spot on……..I am a risk adviser for 20+ years but will hang about 4 years longer to when I will not be qualified to be here anymore before moving on to a new career path.
To suggest that the majority of advisers have stopped providing risk advice is a sweeping and incorrect statement. Practices that only had a small exposure to risk and some of the smaller R/O practices that cannot operate in the increased compliance landscape may have decided to stop/sell out, but there are still thousands of holistic practices and large R/O practices nationally providing risk advice.
It’s all well and good to suggest directing funds towards hospitals and other industries in need but as a financial planner, surely you would and should be concerned of a growing underinsurance problem in Australia which ultimately becomes a drain on state resources? This in turn will negatively impact funding for industries like healthcare.
Multiple countries have attempted this before and it didn’t work. If common sense prevails, treasury will heed the advice of the FSC and take on board the clear evidence provided as to why commissions are needed in some way, shape or form. The day of the insurance salesman is gone but the need for wealth protection advice will long remain. If you are leaving it out of your advice piece, you are doing your clients an injustice.
Thats a fair comment, however writing insurance policies at the moment with massive price increases in premiums year on year isnt really what I want to be recommending to my clients. There is no control on premiums, you write a policy and in 5 years they lapse it due to all the out of cycle increases due to so called bad claims experience, even on level premiums. Its a minefield writing insurance at the moment, its even harder trying to keep existing clients on board with all these increases. For example today another 13.50% increase across the board with a companies ip for all existing clients. You try to forecast client affordability in terms of cash flow on stepped premiums or even level premiums and advise on that projection provided in the quote for your soa, however its just impossible to forecast anything when you dont know what increase is coming next. In the meantime you can still get non underwitten cover for peanuts through super funds, whos underwriters are the very same company that are shafting your fully undwritten client base. What a mess
Advisers are copping a lot of grief from clients right now for the poor practices of insurance companies. When you combine this with the decline in commissions, increased clawback period, and all the regulatory hassles, I am thinking about just giving fee for service strategic advice on insurances from now on.
No specific product recommendation. No implementation assistance. No ongoing admin or claims assistance. Clients can pick their own dodgy direct provider based on advertising, and deal with all those hassles themselves. It seems to be what ASIC, Choice, CALC, FSC, the unions, and the govt all want, so why fight it anymore?
You only need to speak to the insurance companies and insurance BDMs to know insurance has fallen off a cliff. I would be interested to know how you do Income Protection for a 25 year old on $50,000 per annum and expect to make a profit when the upfront is now approx $500 ?? How would you write a SOA to cover the cost ?
uncommon common sense at last!
lest see if that is reflected in the reviews
There is only one thing to analyse. The collapse of new risk business, and the Govt’s complete ineptitude in creating this outcome via LIF, FASEA, & Hayne2 etc.