Claims refusals a key industry issue, says AIOFP
More than half of consumer complaints about risk insurance relate to institutions refusing claims, and not advice, according to the AIOFP.
In its submission to the Senate Economics Legislation Committee regarding the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016, the AIOFP said the industry issues that the bill is meant to address have been misrepresented, with the focus being on commission payments.
"This has diverted attention away from [institutions'] primary commercial objective of marketing directly to consumers to sell potentially flawed product and imposing difficult trading conditions on independent advisers to reduce competition," the statement said.
"[Financial Ombudsman Service] data show that 70 per cent of all consumer complaints from risk-related products are consumers complaining about Institutional conduct refusing risk claims.
"Although precise information on rejected policies is closely guarded by the institutions for obvious reasons, market feedback indicates the rejection rate of these policies at point of claim exceeds 50 per cent and, in some cases, 60 per cent," the submission said.
The association added that claims by Assistant Treasurer Kelly O'Dwyer that the bill is supported by the industry are incorrect.
"Very few of the 16,000 advisers in the market support this legislation. It is simply not what the advice industry wants; it's what the institutions want," the AIOFP said.
Further, the submission states that the bill may lead to consumers having fewer choices as well as to higher prices as result of independent advisers leaving the industry.
"The attempt to reduce an independent adviser's revenue by 50 per cent and then have uncertainty around retained revenue for 2 years under a clawback structure has been designed to eliminate independent advisers from the industry," the statement said.
"The institutions are trying to do what the oil companies and large retailers have done to small business operators in the recent past – exerting their political and commercial power, driving [small business operators] out of the market and leaving consumers with no distribution choice, poorer service levels and ultimately higher pricing."
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