The Hayne royal commission final report recommended to ultimately reduce the cap on life insurance commissions to zero unless there was “a clear justification for retaining those commissions”.
But in a contributed blog, Synchron director Don Trapnell said he had a clear justification of retaining life insurance commissions.
“Life insurance commissions are good for consumers. Yes, good,” he said.
“What happens when you take away life insurance commissions is that consumers do not seek out and pay for life insurance advice.”
Mr Trapnell cited the experience in the Dutch market where commissions were banned.
He said that in the Netherlands, advice is now only sought and paid for by the wealthy, not the everyday consumer.
Because it is restricted to those who probably need it the least, Mr Trapnell argued that those who probably need life insurance advice the most have to resort to getting advice over the back fence and purchase products online or over the phone.
“We all know from the royal commission how well that goes. Not well,” he said.
“Ban commissions in Australia and you can expect similar outcomes – many everyday Australians just won’t be able to afford to pay, or would be unwilling to pay for advice upfront from their own hip pockets.
“They will therefore have to be content with the cover they have in their super funds, if any, take life insurance tips from their mates and buy direct or go without. How is this a good outcome?”
well said from Don and some great comments already. i couldnt “reply” as that feature doesn’t seem to work. Hayne did a woeful job and this will come out as the years pass. He is not accredited or experienced in the industry and possessed far to much arrogance and often his behavior could be seen as a narcissist. A person in his role would need to understand the industry and ideally have degrees suited for the industry. Oh wait, it wasn’t about advisers, we were not in court……………but we face the consequences.
his thoughts on many things but ill touch ion just 2 demonstrate stupidly of a novice. he feels that the reductions so far have not effected the provisions of risk insurance and so to cut it further to zero may have the same consequences or little to nothing. That’s incredibly stupid and i cant say it more kindly. We are resilient but enough is enough. he further states % of industry fund insurances across the nation but has no idea about the appropriateness of the levels of covers or the poor definitions of their TPD and IP covers. I doubt the % holding above $100,000 or insurance would be more than 5% of all members. However, wherever it is, it is unlikely to be sufficient to meet the needs of a loss of bread winner and the mortgage on a home. Utter nonsense to listen to him in the commission.
Secondly, cross subsidisation does work using commissions and they have allowed that in mortgage broking. It is centrelinks model, which is subsidised by tax payers AND UNWILLING, for thise in need and those who pretend to be. Its also is how insurance works, it receives premium payments and that is mostly paid out in claims to thise in need. I recently took a picture of those waiting in the foyer. 2 out of the three had been to solicitors for claims but due to their inability to pay were soon dropped. We wont go into their procedure and lack of checking any details and allowing such mistakes of diagnosis etc being in the next year. We wont cover what the solicitor omitted to discus about the fees for the claim if successful and thats because they hadnt discussed this with these less fortunate people with very average education. However we picked them up and delighted each one of them with successful claims and uncovered one which had cancelled 2 years before, but we proved the disability occurred whilst it was inforce. No one else would have found it.
Commissions work and we don’t need to chase up our remuneration which allows more service to our clients and to protect more people under BID and commissions that cant be conflicted now as they are the same.
the future looks bleak for Australians being served efficiently and cost effectively and now we have to justify each dollar we receive and it appears I have to ask 900 clients to walk and become orphans i couldn’t look after them under a FFS structure.
That and a whole lot more has bought my ethics to be challenged and that i cannot serve those in need in the future unless they are wealthy enough to value and afford the much higher fees required to meet the compliance and advice process. The real ethics and car has to go for this new model and i cant be part of that. when you climb the ladder of success, just make sure its against the right wall and 30 years ok i started this with the mandate to help all those in need irrelevant to what i earned out of each need. That vision cannot survive now and we would need to chose who we can help now and so………….I resigned yesterday. I have ethics that cannot be compromised and I am burnt out and need to focus on my family whilst i still have some values left. I hit rock bottom late last year and I cant allow it to destroy me further.
I really think the research is sub par. Firstly asking someone to say how much they will pay is not a subjective test. A better test would be to ask if over 5 years if you could save $X would you be prepared to pay $Y. Commissions are paid by product producers as a distribution cost, therefore it should not be hard to have a nil commission product with these costs taken out. I am not anti-commission if consumers can make a comparative decision , an adviser demonstrates that there is a real benefit of opting for commission or a consumer states that they do not want to pay up front being aware of the real costs.
If this approach is implemented we would not be discussing this anymore, there is no real argument if the consumer has made the decision.
at least someone has the guts to say it openly, where are the life companies CEOs, other heads of the organisations, other experts from the industry coming and making statements what is good for the clients and what is not??
compare this with the mortgage broking industry where there are strong lobby groups, both the government and oppositions have changed their original positions and now do support comissions there…
AS usual Don Trapnell is spot-on. Hayne is an academic pin-head (sorry, no attempt at humour – that IS an accurate description) with ZERO experience in the real world with real people with real world insurance needs. No experience at the coalface whatsoever. It is beyond laughable – no, very sad – that he has been put in the position of chairing the RC as he is wholly unqualified to rule or make recommendations in this area. This man Hayne is undeniably conflicted with bias against life advisers, life commissions and, incredibly, life insurance itself. Coming from one of the elite in his rarefied wealthy universe it is somewhat understandable. Honestly, my plumber, who is a client, is MUCH more experienced in the area of insurance needs than Hayne and people would do MUCH better listening to my plumbers wisdom on the subject. Seriously. It is my earnest hope and that of many other advisers, that common sense and logic prevails and commissions stay. There is ZERO conflict of interest with commissions now with all companies paying the same – WHAT IS the issue this biased creature Hayne has with commissions??! Please, anyone else out there with an articulate voice to the media, NOW is the time to echo Don’s comments LOUDLY to the listening world. Our time windows to affect opinions appropriately is small. Life companies . . . are you awake YET?! (Zurich & MLC excepted – good on ’em)
This is driven by industry funds. They want to abolish risk commissions to destroy the advised market and the direct markets. This will then make industry fund group insurance the primary place to get insurance (although quite inferior at that). Naturally labor will want to support the views of industry funds and hence abolish life commissions. This was not the case for mortgage brokers as the Industry Fund owned ME Bank relies on mortgage brokers and hence has argued against banning commissions on mortgage brokers. This is why Labor backflipped on mortgage broker commissions and why their approach on life commissions is completely hypocritical. If they agree mortgage brokers should have commissions then why shoudln’t life insurance brokers ? Political self interest here. Under LIF, life insurance sales were already down 20% in just the first year of its 3 year roll out !
I don’t think there is an argument of merit against commissions. I guess people should be careful for what they wish for as they may well get this. As an adviser who has had a multiutude of claims including from family members for life insurance, all have been successful not ending up in the courts. No one has lost their house because of a flawed claim and lawyers didn’t pocket money for litigation either. Unethical practices can be stamped out by regulators, but the regulators and government ministers, driven by ignorance of what we do for clients, either choose to ignore or use our industry to drive a political ideology and ensure that consumers remain ignorant in matters of taxation and their betterment such that they will be poor despite what they say to the voter. Advice only for the wealthy is not in the best interest of anyone. But, hey the fools putting this forward do nto have to subscribe to a best interest duty either.
The conspiracy theorist in me says maybe this is a play by the insurance companies to boost their direct markets?