During a panel discussion at the AFA 2016 National Adviser Conference in Canberra yesterday, AFA chief executive Brad Fox asked Mr Moffitt what life insurers planned to do with the extra profit they will receive from not having to pay adviser commissions.
Mr Moffitt, however, rejected this claim.
“From our perspective, those changes do not increase the probability of a life insurer,” he said.
“It does actually improve the capital position of a life insurer. We won’t require as much capital because upfront commission in effect represents a form of capital. So that does improve the return on capital that the life insurer will get post LIF.
“But more broadly, there is no additional profit.”
Mr Moffitt added that there are other areas life insurers still need to improve.
“I think there has been a lot of conversation about improving claims management processes. Those improvements are coming in. There is definitely a drive in the market to drive greater efficiency,” he said.
“Things need to be continually be enhanced and focus on how do we get better information out to consumers, how do we help educate them, how do we drive more efficiencies so we can access collectively more people.”
During the panel discussion, APRA member Geoff Summerhayes said the life insurance industry is facing reform because it has “lost is social licence to operate”.
“There’s a lot of finger pointing that goes on in the industry and that’s, in my view, unproductive. We need to turn that energy to the stakeholders outside of the industry to win back the trust and confidence,” Mr Summerhayes said.
“There’s no point in tearing the industry apart from the inside because all that will do is bring another layer of government and/or regulatory intervention.”
Another con. Never trust again what any insurance company Exec or member of the FSC states. The only one that probably fell for this line was Brad
Insurance Companies wont profit from the LIF Hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah
There is a hidden message here and that is insurers will go after levels Comms and finally hybrid Comms in the future. End result zero comms
Mike,
Commissions aren’t reduced in total. The increase in renewal commissions more than offsets the reduction in upfront commission.
How do you know if $2.9b profit is high or not? You’d need to understand how much capital is being held and the return on that capital to come to an informed view.
Interesting staged question? How about, what will the benefits be for consumers?
Ask that question Brad, over and over again until finally someone from the FSC will have to admit “No benefit to consumers in any way”
Insurers won’t profit from lower commission rates because in the long run hybrid and level commissions are actually higher. Insurers will profit from lower claims and underwriting costs, because unadvised consumers will be duped into buying junk policies that don’t get underwritten and don’t pay claims.
ok, so insurers will not profit from the reduced commission paid to advisers. So, that raises 2 main points for me.
The first is that BT must be saying that they will use the lower commissions to improve other aspects of their business and effectively spend this extra money on improving services that they should have improved already. So, advisers are basically paying for insurers to improve their service !!
Secondly, the myth of lower premiums is clearly now debunked. If the insurers will not generate extra profit then they will clearly NOT be able to afford to reduce premiums.
One last point, I read an article the other day about the $2.9b (yes Billion $$) of profit that the Life Insurers made last year. Wow, a really struggling sector. How did they do that whilst paying saying such exorbitant commissions to advisers ?? Oh, and the churn, well it must be killing them !!! Please…………………just another massive con job !