In a statement, the LICG argued the FSC has opted to hastily force the LIF through Parliament with messy legislation because it did not believe it would survive ACCC scrutiny.
“The FSC has no data on which to justify their position, no rationale behind reducing remuneration to their recommended level, and no one has been able to specify one single benefit to consumers,” the LICG said.
“There is no evidence of ‘churn’. No-one has even defined ‘churn’.
“That would make it difficult to justify to the ACCC.”
The LICG also questions why the FSC has not gone to the ACCC if it believes its own arguments about ‘churning’ and significant consumer benefits and has sufficient evidence to substantiate the claims.
“Had industry gone to the ACCC with a proposition that could provide a better outcome for consumers, despite the negative impact on some industry stakeholders, such reforms could have been implemented a year ago,” the LICG said.
“Consumers deserve to be able to trust that our financial services sector representatives are acting for them and not just for the shareholders of the huge organisations that make up the FSC.”
The Insurer members of the FSC are both Life Insurance product providers and distributors of their own products through their direct insurance businesses that provide the consumer with Life Insurance product, but without advice.
It is this very fact alone that identifies a conflict of interest when considering the process the FSC has perpetuated in their urgency regarding the implementation of the LIF legislation. In addition, it has now been identified the FSC provided submission to Treasury on 24th Dec, 2015 pushing for the direct insurance business to be EXEMPT from the LIF legislation. This fact clearly identifies significant concern that the FSC are not acting in the best interests of the consumer, but are acting in the best interests of the financial services businesses who are fee paying members of their organisation. For these companies to be able to operate direct insurance businesses that were not subject to conditions imposed by the LIF would be significantly more cost effective than for them to have to comply. Compliance is costly and these companies want to avoid those costs.
The Life Insurance companies that engage in direct insurance business are competing with each other, but also with the independent adviser for market share.
If these businesses can generate greater revenue with less expense, it will return greater profits to shareholders. But the purpose of the LIF is to deliver greater benefits and better outcomes for the consumer, not for Life Insurance companies and their investors.
The Competition and Consumer Act 2010 (Section 46) Misuse of Market Power, has been under scrutiny and review in recent times and the High Court has been quoted as stating that the object of Section 46 is to protect the interests of the consumer.
Until now, neither the FSC or in fact the government have been able to identify and clearly define the beneficial outcomes that will be directly delivered to the consumer and the public as a result of the LIF implementation.
It is therefore not surprising the FSC have been pushing extremely hard for the LIF to be implemented as soon as possible in an attempt to avoid any detailed scrutiny from the ACCC.
Brilliant commentary and research from the LICG yet again. So much energy and conscientious effort being put into making sure changes actually benefit the consumer. Well done LICG !