Appearing before the House of Representatives standing committee on economics on Tuesday, ClearView managing director Simon Swanson was questioned by MP Anne Aly around recent MetLife research that asserted seven out of 10 consumers would prefer to purchase advised life insurance through an up-front fee with a lower commission.
Mr Swanson said the insurer was in favour of maintaining insurance commissions at the current levels mandated by the LIF, as preferences around payment structure “depends on the relationship between the adviser and the customer, and the circumstances of the customer”.
“With respect to charging a fee for advice and implementing advice, most insurance companies allow you to dial down the premium by the amount of commission, that is about 27 per cent of the premium,” he said.
“The fee for advice for life insurance is between $3,000 and $4,000, so often the customer doesn’t have the capital to be able to fund that up front payment and therefore is comfortable to take the commission inside the premium, so it’s up to the circumstances of the individual.”
Mr Swanson said as the financial planning profession evolved to place increasing importance on holistic advice, it was important that consumers not miss out on insurance advice as part of this due to affordability issues.
“The cost of capital to an insurance company is less than the cost of capital to the individual, that’s what it comes down to,” he said.
“Some customers are happy to pay an upfront fee, but our view is we want planners to do holistic advice and appropriately put in life insurance and super. That’s our view of how financial planning is going to evolve in the next five to 10 years due to the removal of rebates, grandfathered remuneration, improving standards through FASEA and so on.”
Mr Swanson said that in ClearView’s opinion, once risk commissions had reached the levels mandated through the LIF and grandfathered commissions had been removed, “the appropriate balance will have been achieved” between affordability and improved consumer outcomes.
He also called for the government to consider making financial advice tax deductible, saying the time was right for policymakers to implement the move given the rising cost of advice and the growing complexity of the tax and social security system, as well as Australia’s continuing underinsurance problem.
Simon Swanson, I would like to buy you a beer.
MetLife have such a huge percentage of the Australian Retail Market they would know that as a fact. NOT!
Did they not read the first article ” RISK MARKET HAS WORST YEAR IN DECADES ” that sums it up, the current system is working well is it not? Insurance is sold not brought and the sooner they realise that the sooner they will go back to a realistic remuneration system, charging a upfront fee for insurance does not work, has never work and will never work, but the level of commission and the level of compliance that we have to do just to provide basic cover for a normal Australian that has a mortgage and a few children is a joke, its NOT financial planning and the average Australian just wants someone to help them with puting the right cover in place at a reasonable cost. Scrap the LIF reforms, make it a free market and make the insurance companies compete for it, The wheel wasn’t broken, just the people that ran it.
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Why would anyone think it prudent to remove choice from the consumer. These people don’t care about the consumer they are ideologues or agenda driven.
I refer to FASEA Code of Ethics all advice needs informed consent the method of that remuneration should no longer be a concern.
ClearView is the crew who sold hundreds of cold call life insurance policies to indigenous people on remote outposts.
Now he is advising the government.
Figure it out
Not even an apology
Mental note to self: DO NOT write any MetLife insurance for clients…
Its a fairly simple equation – if there is no financial reward for effort and compensation for BUSINESS RISK to the adviser, then the adviser will cease to provide the service. This is the main issue adviser face and ASIC + politicians are not interested in hearing it.
Insurers know banning commissions will kill their businesses but they are still trying to cling to the LIF rates brought in by false pretenses by them through the FSC. They can’t keep discounting new business premiums and raising existing customers premiums to desperately increase new business and cashflow forever.
They are completely reliant on advisers now.
Commissions work better for customers period. The current commission rates and clawback period do not cover the cost of advice period. Either they get back to the drawing board or the industry is doomed either way.
Given LIF designed by ODwyer, Frydenberg and the FSC was all about screwing Adviser to sell more junk direct Life Ins.
One good thing the Royal Commission slammed direct Life Ins and that game is now fading. So what do the Life Co’s do now.
Advisers are the only real hope but not likely at LIF comm rates and ever increasing BS Red Tape REGS costs. The equation simply doesn’t stack up. Nice work ODwyer and FSC you really screwed yourselves on this one.
I think some applause should go to Simon Swanson from Cleaview in spelling out the costs of providing advice and the support of commissions. Now it would be great for all the other Insurance CEO’s to come out an support him. Insurance inflows have dropped off a cliff, people are cancelling cover, insurers are jacking up premiums – the industry is in a death spiral, and we need a way to increase the insurance pool. My opinion is we need to reduce unnecessary red tape, and increase omissions back to 80/20 so that there is some incentive to write Risk business.
I agree with your comments. I also agree there should be some incentive but unfortunately, incentives seem to be called conflicts of interest by many (ASIC, etc) and once all conflicts are removed, all incentive is removed – but has been replaced with regulation. One could argue that ASIC has a large incentive to dream up more regulation as the more regulation there is, the more funding ($$$$$$$$$$$$$) they will require to enforce more regulation – with obvious result being less Financial Planners, less Insurance, less everything except more being pushed to Intra Fund Advice provided by guess who.
Perhaps an apology to the First People before applause for an unabashed sales pitch
perhaps you should go away with your virtue signalling, troll
“The fee for advice for life insurance is between $3000 and $4000” said Clearview managing director Simon Swanson when questioned by MP Anne Aly at the House of Representatives Standing Committee on Economics.
It shouldn’t be!
If that’s not a wake-up call that this industry is over-regulated and is now only accessible to the rich – nothing is!
Direct selling got hammered. Insurance within super got hammered. Advised insurance constantly gets hammered. Leaving most peoples personal insurance a reliance on the good will and marketing on a goFundMe page or Family when a serious risk event occurs.
It’s an absolute disgrace.
Advice isn’t affordable when it takes 6.7% of the net pay* to get life insurance advice (not including the cost of life insurance) our system is FUNDAMENTALLY broken!
* Based on Average weekly Earnings from the ABS
He is not saying it should be that, he is saying that is what it is. I charge $3,300 and if anyone doesn’t want to pay it then I don’t help them. Personally I think the level of compliance I have to do for a simple insurance policy is at least three times what it should be but I don’t set the rules – I just need to follow them. The net position is you are correct the system is broken.
Where are you charging that $3,300 too?
Is Labor seriously suggesting financial advisers should charge $3-4k for life insurance advice as a one off? What about ongoing advice and help with insurance claims? Are we supposed to operate as charities for this service, or do clients get charged the $3-4k multiple times over the life of the policy? Sometimes I wonder what planet these politicians live on
The Metlife research did not suggest that consumers prefer a fee. In fact the research stated only one in five (19%) said it would make them more likely to see an adviser if commission was removed. And those who said they prefer a fee only said they would do so if there was a material reduction in all premiums (which there would not be). Nearly three quarters (72%) of consumers thought removing commissions would result in more people being underinsured as per the report. I wish these points were made in rebuttal and that people would read the research properly.
If this is true then it seems like the Labor politician has deliberately misrepresented the MetLife research. (Probably under instruction from the union officials who control both the ALP and “Industry” funds).
MetLife needs to get on the front foot and call out this deliberate misrepresentation. They need to clear the air about exactly what should be inferred from their research. They should make it clear where they stand in relation to insurance advice funding, just as Clearview has done. Perhaps MetLife should appear at this enquiry?
Of course consumers will say yes to a survey question asking if they would prefer to pay a fee with reduced premiums rather than commissions. They have been deceived by the unions and Choice into thinking that commissions are always bad for them. And they assume the fee will be the same as the premium reduction. But it’s not in most cases. Only when premiums over about $10-15K does the removal of commission start to outweigh the cost of flat fees. If you asked consumers if they would be willing to pay a higher price upfront to replace commissions with fees, most would say absolutely not.
This is a dodgy survey from MetLife. Either they don’t understand how advised insurance works, or they asked deliberately misleading questions to get the result they thought their union fund group insurance customers wanted. Either way it’s a good reason for advisers to steer clear of MetLife’s retail offerings.
What Anne Aly would know about the risk insurance business you could right on the head of a pin, cut the head of the pin off and throw the rest of the pin away.
Do you think at this point in time, or any other point in time for that matter, that a federal MP being paid 300K plus by the taxpayer should be wasting her time and taxpayer money trying to corner an angle on a subject she would know nothing about purely for Labor ideological point scoring ?
Has Anne Aly questioned why the Industry Super Funds transfer millions and millions of funds to the trade union movement via the re-distribution of Directors fees ??…..of course not.
Has she questioned the issue that may be facing Labor loving law firm Maurice Blackburn and the connection with their own Chair, Steve Bracks and the recent issues with Victory Offices as noted in the last weekend’s Weekend Australian?….of course not.
In addition she has had time to write a book in 2018….wait for it…about herself….at the taxpayers expense Anne ?
Anne Aly is supposedly an international expert on terrorism and radicalisation….I think she needs to stick to her knitting.
What an absolute waste of time.
well said …. hopefully the reality shock we are all in will flow through to sensible decision making but I fear that the protected elements in society, as detailed by Customer, are immune from the shock and so will continue with their ideological quests
The MP asked a question based on a reasonable research report. She asked this question of an informed person (CEO of another insurer), giving an opportunity to test the results of the research report, and the input of Mr Swanson.
This is actually what we should be hoping for in these debates.
MetLife seem to be very prevalent in the survey space of late.
One would tend to believe that MetLife have an agenda.
One would tend to believe that MetLife’s agenda is one of self interest.
The issue however is that the question she asked was to achieve a preferred result and interpreted to achieve that goal. If the survey question was “would you rather pay a fee of between $3,000 and $4,000 to achieve an annual saving of $500 would you pay the fee?”. I can get someone to say I’m skinny if I phrase a question correctly but that doesn’t change the fact that I am fat.