The government said it “agrees” more can be done to better align the interests of financial firms and consumers, however it added that it “intends to take a different approach to that recommended by the inquiry for retail life insurance”.
“We support the retail life insurance industry’s proposed reforms as announced by the then assistant treasurer on 25 June 2015. The government will consider the extent to which legislation and/or action by ASIC may be necessary to implement the industry agreement,” the government said in its response.
“A government review in 2018 will consider whether the new industry arrangements for life insurance advice have better aligned the interests of firms and consumers. If the review suggests further reform, consideration would be given to the inquiry’s recommendation for a level commission structure or further extending the existing Future of Financial Advice provisions on conflicted remuneration to life insurance advice.
“The government will also develop legislation to allow ASIC to ban individuals from management within financial firms from operating in the industry,” the response said.
The Turnbull government has also agreed with Mr Murray’s recommendation to introduce a mechanism to facilitate the rationalisation of legacy products in the life insurance sector.
“It is important that consumers should not be worse off due to any transition to a newer product,” the response said.
“Under the existing framework there are possible tax implications of facilitating the transition away from legacy products, which will be explored in the context of the government’s taxation white paper process.”
More to come.
To quote the article — A government review in 2018 will consider whether the new industry arrangements for life insurance advice have better aligned the interests of firms and consumers. In other words if life companies aren’t making a sufficient return on equity (and there is no such thing to the major banks) and consumers think insurance is too dear (which they all do) then further changes will be made. I am still waiting to hear from someone how the proposed changes, particularly the three year clawback, make your standard consumer better off. For the record I have no problem with Upfront moving to Hybrid commission.
Interesting comment and a good point! “It is important that consumers should not be worse off due to any transition to a newer product,” the response said.
But how about addressing the fact that consumers should not be worse off due to the increased costs to them of receiving advice which is where the industry is headed. The majority of consumers will not be better off under the current proposed rules. So is this about the consumer or is there an ulterior motive (life company profits) driving these reforms?
I feel so much better now that this was explained so well NOT
Clear as mud