ISA calls for ‘rigorous’ reforms amid CBA scandal
Industry Super Australia (ISA) is reiterating calls to ban commissions on life insurance, saying consumers will continue to get hurt financially until it is done.
In response to Fairfax Media reports which uncovered errors in CommInsure's handling of claims, ISA said commissions on life insurance should be banned and a rigorous code of conduct should be developed.
"Banks and insurance companies must now show the necessary leadership," said David Whiteley, ISA chief executive.
"These scandals are causing harm to the Australian public, often when they are at their most vulnerable. It's incumbent on the banks and insurance industry to place the interests of the public first.
"These scandals build on an ASIC report 18 months ago which revealed extensive illegality in commission-driven sales and other cultural problems in the life insurance industry," Mr Whiteley said.
Banks and life insurers spent 2014 lobbying to "remove consumer protections" included in the FOFA reforms, he added.
"Now they're trying to water down consumer protection measures in the Life Insurance Remuneration Arrangements Bill currently before Parliament so they can continue to structure their life insurance businesses to maximise profitability," he said.
"Rather than lobbying to reduce consumer protections, they should grasp the nettle of reform and demonstrate genuine leadership."
Mr Whiteley added that the reforms currently before Parliament "fall hopelessly short" in addressing the problems.
"These reforms are weaker than those recommended by the Financial System Inquiry and the industry-commissioned Trowbridge report," he said.
"Capping upfront commissions and reducing ongoing commissions may be an improvement on current practices but sends a message that commissions are acceptable in the life insurance market. They are not."
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