Responding to the introduction of the Life Insurance Framework (LIF) legislation – which has now passed through the House of Representatives – Mr Chalmers told Parliament that while it will help improve customer outcomes, the bill is “not perfect”.
“It is my view that although these changes are worthy of our support, we should consider them as a step in the right direction and not the arrival at a final destination,” Mr Chalmers said.
“We strongly believe that the new framework must be monitored following implementation to establish whether it is working, or whether more needs to be done.”
Mr Chalmers said Labor’s “priority” is consumer protection and pointed out that the bill could “do better in this regard”.
“One concern is with the clawback provisions in the final package. The clawback provisions are limited to the first two years of a life insurance policy,” he said.
“We would not want to see financial advisers pressure customers to unnecessarily change their life insurance policy after two years, as a result of these changes.”
ASIC’s review of the effects the legislation has on the industry will also be integral to determining the future of the sector, he continued.
“If further evidence emerges that advisers are doing the wrong thing by people – and we can’t rule that out – then we need to be ready to consider and respond to that behaviour as well,” he said.
Meanwhile, Liberal backbencher and federal member for the Queensland electorate of Forde, Bert van Manen, told Parliament he cannot support the bill in its present form due to the “significant damage” it will inflict on independent financial advisers.
“We risk losing our independent financial advisers as a result of this bill, exposing consumers to the risk of losing access to unbiased, broad-ranging market research, and they do not even know,” he said. “The solution to this is not to reduce commission or increase clawback to align adviser behaviour but rather to focus on the true causes of poor advice.
“What is essential for good insurance advice is a move to an advisory and fiduciary culture which focuses on strategic life insurance advice on a basis that is as holistic as possible. Whilst this bill reduces the financial incentives it does not address the root causes of poor advice.
“These reforms cannot be rushed without understanding the significant collateral damage being done by insurance companies to IFAs. Consumers will, unfortunately, be the losers from these reforms if there is no obligation on insurers to deliver any benefit to the consumer,” Mr van Manen said.
Hear that? Resounding silence from the FPA & AFA, again.
Agree with AJ’s comments, they have sold us out probably for Rantall’s fool’s errand of ‘enshrinement’. Hope it was worth it Mark.
Thanks to Bert van Manen for his understanding and support in calling out the LIF for what it really is…A false attempt by the insurers / FSC to transfer profits from small business advisers to large business insurers with no benefit to consumers.
So a policy that will see those that guide consumers with advice become “uneconomic” is worthy of support.
With no advisers it will be the consumer verse the mighty insurance companies which will then see this idea become “worthless”.
I notice how the under insured numbers are rising.
Once this piece of legislation becomes law, watch the numbers really rise.
We are going to drop life insurance from our product list. Just won’t be worth getting involved with anymore.
LIF – an unholy alliance between the insurers and the unions to screw consumers. Advisers are just collateral damage.
How about politicians get a salary claw back everytime one of their policy positions is reversed and legislation repealed…
I watched Jim Chalmer’s Parliamentary performance yesterday.
One would think that when addressing Parliament you would have to base your case on accurate data and be able to justify your comments with quantifiable evidence.
Most unfortunately, when Jim Chalmers makes comments regarding the benefits and protection to consumers that would result, he is unable to justify this as he has no evidence or analysis as to exactly how this would occur.
This is no different to Kelly O’Dwyer and the FSC repeating the same or similar statements.
To state that a reduction in remuneration,an extended clawback provision and increased education requirements will automatically result in consumer benefits and protection against poor advice is nave,misguided and manipulated to suit an intended outcome.
The intended outcome is evident in the tone of Jim Chalmer’s address yesterday and evident in the FSC’s media release dated 6th Nov, 2015 titled FSC Statement on Life Insurance Reforms, where they state “In the longer term, we believe more refinement WILL be needed to improve consumer outcomes”.
So, the FSC are stating that changes WILL be necessary in future even before the proposed changes have had a chance to be implemented and assessed to their effectiveness.
Andrew Bragg (FSC Director of Policy) in this media release is quoted, “As the financial advice profession matures, we EXPECT ALL financial advisers to move to a fee-for-service model”. and ” Many financial advisers have already moved to this model”.
How many Risk Insurance only advisers have moved to a full fee-for-service model, in relation to the total number of Risk Insurance only advisers in Australia?
Perhaps the FSC could conduct a survey and assess the results before using terminology like “many” without analysis.
Perhaps Jim Chalmer’s wish would be to have a clawback applied to the life of an insurance policy?
Are we likely to hear Labor’s real “final destination” in the lead up to an election? Far from likely. They will have to walk a fine line of winning friends leading up to the election and should the unlikely happen and they get elected we have to remember who controls the Labor party.
Can someone enlighten me please. How is LIF going to improve customer outcomes?? This has nothing to do with the customer experience, this has been driven by labors hate for financial planners and the product providers greed.
Reading between the lines of what Chalmers is saying is, beware, this the the start and watch out if labor ever get elected again!!!!
Great words and support from Bert van Manen. As we all know this has been a targeted campaign from the FSC and insurers using a suspect ‘survey’ into risk advice. Cherry pick the very worst and hold it up as representative of the whole. Mr Chalmers is simply reading from the crib notes supplied by the Union Super Funds.
Van Manen for Prime Minister?
Nice to see someone consider both sides of the equation and actually focus on realistic consumer outcomes if less risk advice is provided.