ASIC was unambiguous in its assessment, revealing an “unacceptable level of failure” in the life risk sector.
Having reviewed more than 200 files from “large, medium and small” licensees, ASIC determined that 37 per cent of advice reviewed “failed to comply with the laws relating to appropriate advice and prioritising the needs of the client”.
In addition, the report found that “high upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch products”.
“The industry as a whole needs to consider how remuneration and compliance practices can better support good quality outcomes for consumers,” said ASIC deputy chairman Peter Kell.
Stopping short of recommending an upfront commissions ban, ASIC recommended that licensees “ensure that remuneration structures support good-quality advice that prioritises the needs of the client; review their business models to provide incentives for strategic life insurance advice; and increase their monitoring and supervision of advisers with a view to building ‘warning signs’ into file reviews and create incentives to reward quality, compliant advice”.
ASIC also makes a number of recommendations to life insurers, including that they address “misaligned incentives in their distribution channels”.
More to come.
Dacian, if you read the report you will see ASIC admit the report was not a random sample of advice. It was targeted. They accessed information from life insurers to identify advisers who were a) writing a high level of insurance; and b) cancelling a high number of policies. With that information they could identify high risk pockets of advice (ie. churning). It is a disgrace that ASIC omit this vital piece of information from their press release. The mainstream press are now using the report to infer that 37% of all life insurance advice is non-compliant with the law. If ASIC are unable to act in a balanced and fair manner, a cultural change is required, starting at the top.
Pauly, there is nothing wrong with level comm as a method of payment. You can go fees if you want but there is room for multiple business models. You get paid the same whether you stay or change. Leveling comm b/w providers would really lock it in.
Risk is a grudge purchase and commissions are not evil if they are structured appropriately. Upfronts are the problem.
The report acknowledges that insurance is sold directly and through a super fund (on page 4). On the same page, the report says they were specifically looking at insurance purchased through advice. The sample was taken from advisers who sold a lot of insurance. It did not target “bad advisers”. Over 1/3 of the sample advice failed to meet the legal standard required. That is unaccountable and we cannot discount the impact of commissions have on this result
What the heck? Just ban all commissions on Risk. It’s about time we, as an industry, figured out how to charge for the advice and review of this product class. I have been doing this for some time and we still write profitable risk business with very high levels of take up of advice. Sell the analysis and review. Sell the implementation and sell the on-going reviews. Discount all the commissions across the products and the client can then afford to implement. This also get’s ASIC off our backs and raises our standings with the consumers. Are you brave enough?
[quote name=”Joe”]What a load of BS – supposed ‘bad advice’ I would hazard a guess is still far better than the ISA no advice model, the telemarketing insurance offers, or clients having no cover at all!
The last time I looked 37% was the minority, which means that the vast majority are obviously doing great work!!Typical ASIC media release rubbishing advisers for their own gain, with biased Labor appointees, Kell & Medcraft, always aiming to denigrate our profession… sickening.[/quote]
GREAT CALL Joe! (Sorry if you saw a ‘bad comment’ show up from me for this – I think you’re spot on.)
How absolutely narrow minded can you be – you’d think e he was running for Parliament!
In conjunction to the comments I made yesterday about Mr. Kells opinion of advisers in our industry, I would now like to know of the 37% of its sample of 200 advice files were considered to have failed to comply with delivering appropriate and compliant client advice how many were industry Super based files, direct insurers (who don’t seem to have compliance obligations whatsoever)and/or Bank Financial Planner files? I must have my head in the clouds and be a terrible judge of character and professionalism if his figures are directly related to the advisers Ive come to know and respect over the last 7 years. Me thinks this man has a vendetta for some reason.and I dont like it one bit! Edward, I also sensed “he swings to the left!”
I have to agree with comments 2, 5 and 6. If we are going to avoid further tarnishing of Life Insurance, an overall review of Life products and their distribution that includes Direct policies makes sense. Otherwise we risk a dose of the UK’s mass mis-selling PPI saga. For my part the need for greater policing of lapses by Life Companies under a framework set out by the FSC has never been greater
What a surprise! Their results were always a foregone conclusion. After all banning commissions is what the industry funds want isn’t it?
This report is only laying the groundwork for another industry fund/Choice campaign on this. We will now see the industry funds launch a campaign with all sorts of ‘rort’ examples and ASIC will say they are ‘forced to act’.
As the politician’s always say, don’t ever have an inquiry until you know the result!
I didn’t know Kell and Medcraft were Labor appointees! Now it’s starting to all fall into place!
Did ASIC have an inquiry into direct insurers? That’s a time bomb right there and those morons will just ignore it.
In ASIC’s media release, why don’t they mention the investigation was specifically targeted at high risk advisers, whom they suspected could have problems? Why are they deliberately trying to tarnish the whole profession?
What a load of BS – supposed ‘bad advice’ I would hazard a guess is still far better than the ISA no advice model, the telemarketing insurance offers, or clients having no cover at all!
The last time I looked 37% was the minority, which means that the vast majority are obviously doing great work!!Typical ASIC media release rubbishing advisers for their own gain, with biased Labor appointees, Kell & Medcraft, always aiming to denigrate our profession… sickening.
WOW theres a surprise. Upfront commissions should be banned if advisers are serious about quality advice. That way no incentive to churn products. May even may insurance applications easier.
It would be interesting if we had details on what advisers did ‘wrong’ in the 37% of cases, and conversely what advisers got ‘right’ and did well in the others. Does anyone know what asics view is on direct insurance???
It’s pretty easy, keep commissions and ban upfronts, level only.
If we had an industry body with any cahones they would be banging on about this already