In its official response to the FSI – which called for level commissions in order to better align the interests of financial firms and consumers – the government has decided to go with the proposed reforms announced by then Assistant Treasurer Josh Frydenberg.
“The government agrees more can be done to better align the interests of financial firms and consumers. However, we intend to take a different approach to that recommended by the inquiry for retail life insurance,” the response said.
“We support the retail life insurance industry’s proposed reforms as announced by the then assistant treasurer on 25 June 2015. The government will consider the extent to which legislation and/or action by ASIC may be necessary to implement the industry agreement.”
The government also said it will conduct a review in 2018 to determine whether the industry arrangements have better aligned the interests of firms and consumers.
“If the review suggests further reform, consideration would be given to the inquiry’s recommendation for a level commission structure or further extending the existing Future of Financial Advice provisions on conflicted remuneration to life insurance advice,” the response said.
“The government will also develop legislation to allow ASIC to ban individuals from management within financial firms from operating in the industry,” the response said.
The Turnbull government has agreed with David Murray’s recommendation to introduce a mechanism to facilitate the rationalisation of legacy products in the life insurance sector.
“It is important that consumers should not be worse off due to any transition to a newer product,” the response said.
“Under the existing framework there are possible tax implications of facilitating the transition away from legacy products, which will be explored in the context of the government’s taxation white paper process.”
It’s now official the deal is finished, the only change being the date of introduction of the Life Insurance Framework has been put back to July 1 2016. ODwyer said the Government has been working very hard with industry to improve remuneration in particular in the life insurance sector and Id like to congratulate the former Assistant Treasurer (Josh Frydenberg) in this regard. One thing is clear you would not want anyone from the AFA or FPA negotiating in respect to anything. Both organisations and the FSC should be ashamed of the manner in which they have conducted themselves during these discussions. Tell me how the AFA could read the signs so badly at their meeting with O’Dwyer last week – nothing short of disgraceful. Our Industry is set to implode after 1 July 2016, clients will also pay a very high price for poor advice moving forward. RIP.
Interesting comment and a good point! “It is important that consumers should not be worse off due to any transition to a newer product,” the response said.
But how about addressing the fact that consumers should not be worse off due to the increased costs to them of receiving advice, which is where the industry is headed. The majority of consumers will not be better off under the current proposed rules. So is this about the consumer or is there an ulterior motive (life company profits) driving these reforms?
So ASIC will be able to ban individuals from managing financial firms. Hope they start with the Bank Managers responsible for the mis-selling catastrophes of their employees.
Fat chance! The big end of town escapes every time.
Yes, it was only yesterday when we were being told that things were not set in stone and that “there was a lot of room for them to change”. These statements were made AFTER the meeting with Assistant Treasurer and Minister for Small Business Kelly ODwyer and Liberal MP Bert van Manen.
Today we hear that the Government “support the retail life insurance industry’s proposed reforms as announced by the then assistant treasurer on 25 June 2015. The government will consider the extent to which legislation and/or action by ASIC may be necessary to implement the industry agreement.”
I made the comment yesterday that the “proof of the pudding will be in the eating” meaning that I had doubts about the AFA meeting outcome with the ministers based on previous negotiating skills displayed. Well it looks to me as though we are not going to be enjoying what we are about to eat UNLESS the AFA or someone else can pull something out of the fire. I wish them all the best.
Please find detail on insurance commissions