ClearView managing director Simon Swanson agrees that the Life Insurance Framework (LIF) had little impact on advice quality, following a survey launched by the financial services company this year.
The survey, conducted with ClearView members between 20 April and 23 May 2022 to support its ensuing Quality of Advice Review (QAR) submission to Treasury, found that the LIF had “no material impact” on advice quality and actually hindered advisers’ ability to serve clients.
Just 5 per cent said the LIF, introduced in 2018, did have a material impact on advice quality.
Appearing on a new episode of the ifa Show podcast, Mr Swanson said that view by the survey respondents was “a fair call”.
“My view is that’s quite understandable too, because I don’t actually think the LIF framework actually does have much impact on the quality of advice per se,” he said.
“I think there are other issues at play.”
Mr Swanson suggested that the ASIC 413 report into financial advice for life insurance and the corporate regulator’s surveillance around lapses had a much bigger impact.
However, he added that it would be wrong to say that the LIF had no impact at all, saying he doesn’t believe “a change of such significance” would have no effect.
“I do think it had some small impact and I suspect the impact was more in the length of life insurance policy staying in force. The average length of a life policy staying in force, is probably getting up to around seven years now. And that’s actually a very good outcome,” he said.
“Part of that is, again, around the quality of advice. It’s actually been generally lifted. Part of that is around the responsibility period being increased from one to two years as well.
“And you’ve seen that generally change. You’ve seen a reduction in rebroking. Other people call it churn, but I’d call it rebroking, that’s actually reduced quite substantially in the industry. And you’ve seen that reflected in improving lapse rates across the industry. But I don’t think the LIF reforms on their own, had a significant impact on that.”
ClearView’s survey also revealed that 67 per cent of respondents would stop providing standalone risk advice and 20 per cent are unsure if they would continue if further changes were made to life insurance commissions.
Around 70 per cent of advisers said they do not plan to change the way they charge for life insurance advice; 17 per cent are unsure and 13 per cent are willing to change.
Listen to the full podcast with Mr Swanson here.
sorry Simon you are wrong – you can’t measure something you don’t see – Single adviser practice – the LIF cabal – sorry review has meant from a commercial perspective we wont go near the commercial risk of trying to right clients’ insurance – we suspect they need it but I am not doing it. – Standard 6 – it all gets a too hard mate. LIF review an unmitigated failure. Of course the life companies wont acknowledge it. typically I’d have 1.5 cases a month that would convert.
Simon has done a survey which only confirmed what we already know. He is also predicting massive adviser number increases in the next 10 to 15 years which is highly unlikely.
regardless of payment methods, if you’re still thinking you can deliver a compliant SoA in 2022 around Risk Advice you’re dreaming. The work experience kid in a legal firm could use Best interest duty and safe harbor steps to send you to jail in two seconds even for the most appropriate advice.
LIF was an abject failure from the beginning. It was destined to be that way as the input data was severely skewed. If you use biased data, you’re going to get a biased result.
This whole thing has decimated the insurance industry and was the beginning of the end for many insurers who once offered great products at generally reasonable prices.
Who knows where we will go from here, but one tip for the powers that be is to garner input from respected figures in the industry who can provide them with up to date, accurate information upon which reasonable decisions can be made.
what they have all said below: wink:
It beggars belief that so-called “advisers” are still selling products for commission, in the 21st Century…FFS! Sell your advice. Teach people how to use insurance and what NOT to buy and why and then offer them guidance about what they choose to buy, but stay away from the transaction process and certainly never sell someone’s products and THEN try to distance yourself from those same people… You are in bed with them whether you know it or not, so it’s no wonder you’re being screwed! I never sold insurance in the last 37 of my 39 years in the Money Business, once I learned how the game was played. I was only about 31 so it took me a couple of years to work it out, but since then I have helped many people either get or get rid of insurance, charging a fee for my service and time and have taught people to understand what it is they’re paying for and why, more often than not, it’s better to pay than to hope you’re getting a free ride. There is no free lunch/ride…ever…unless it’s family or close friends. If you’re a professional, you’re not expected to work for free. If you’re respected as a professional, clients are happy to pay you.
Most life insurance is a grudge purchase and in the main people need to be advised about their needs vs their wants. The concept of “better to have” just in case something goes wrong in life has never changed…As current advisers are required to put the needs of their clients first then how they choose to be remunerated for their efforts whether by fee only like you, by commissions only or a hybrid of both is their business as the law allows all of those choices. If your current model is working well for you and those you advise then great but remember that is only one option Philp in a world full of choices…
Well, well, well…ain’t it grand! The industry wasted it’s time & energy trying to explain the folly of LIF, but greater minds (let’s call them “the Brainiacs”, shall we?) knew better. Just about all had never practised as advisers, but wait, that didn’t matter, they had reams of reports & spreadsheets to justify their BS positions.
Seriously, what a bunch of no hopers. Safe in their ivory towers, sticking their hands out for their monthly remuneration. They wouldn’t be able to feed themselves in the real world.
And so they have created this disgraceful mess…and where are they now?…who knows?
I’ll wager that they’ll be back soon and say, that LIF experiment didn’t work out too well. We’ve now looked at the UK experience & you know what? Let’s roll it all back to the way it was prior to LIF. Watch this space!!
Meanwhile, advisers roll their eyes at the stupidity & waste of it all.
Fingers crossed that Minister Jones will make sense of it, although his party was mainly responsible for the mess in the first place.
Advisers live in constant hope!
Can’t disagree with these two assessments….LIF is a disaster for all stakeholders. It is time for the engineers to take it on the chin, move away, and Government to stay out of commercial matters…..
Rather than skirting around the issues Simon with conflicting and confusing statements, why don’t you just tell it like it is.??
The ASIC 413 Report was a stitch up by the regulator.
The incidence of so called “ churn” was grossly over inflated.
The 2 year responsibility period needs to be reduced to 1 year and on a pro rata basis.
The upfront commission rate needs to be increased to 90% and the renewal commission at 20% immediately.
Policy churn or “ rebroking” as you like to call it can easily be controlled by ensuring that only renewal commission is paid on any new policy that was previously placed within the last 2 years.
I have seen you repetitively claim that commission rates need to be “ stable”.
Yes they do Simon, but before that occurs, they also need to increase to the levels stated above or the Life Insurance industry is on a hiding to nowhere.
The LIF had been a complete failure for the adviser, the consumer and the Life Insurance companies.
Say it like it is Simon.
Say it like the ClearView supportive advisers will tell you it really is.
Say it like your BDM’s know it is.
No more sitting on the fence with one leg either side.
It’s time this misguided and construed problem called LIF was now addressed and rectified.
REP413 was a stitch up from the life insurance companies. They knew ASIC hated financial planners, and played them for the fools they are. They gave them the biased data (abnormally high volume risk writers) which swayed REP413 towards suspected churners. They then rolled out Trowbridge and lobbied for LIF. These executives won’t admit LIF is a failure because they engineered the whole thing.
Totally agree! I’m getting out of insurance already, not taking on new clients and only reluctantly helping existing clients to ‘rebroker’ when they beg me! it shouldn’t have to come to that!
Such a great comment deserves a better owner than the title “Anonymous”. I agree with ball points except commissions need to be 100/20. Even a 90/20 won’t stand a chance of turning this adviser egress around. Not to mention anything less is an ongoing insult to small business owners who simply want to survive and help people.