The AIOFP is calling on the Senate to refrain from voting on the LIF reforms until after a new parliamentary inquiry is completed, arguing it may reveal fresh information about the life insurance sector.
In a letter to senators, AIOFP executive director Peter Johnston said the new inquiry into the life insurance industry – to be conducted by the Parliamentary Joint Committee on Corporations and Financial Services – has the potential to “shed a different light” on the LIF debate.
With the proposed reforms expected to be reintroduced into parliament soon, Mr Johnston asked that voting be delayed until after the inquiry is finalised.
“We believe the inquiry will reveal critical information that will shine a different light on LIF and will lead to a compromise to assist consumers and advisers,” Mr Johnston said.
“The findings of the inquiry will directly impact the very fabric of the LIF legislation and it should be deferred until the inquiry has reported its findings.”
For example, Mr Johnston said he believes the inquiry will show that consumers are better off receiving professional advice than buying directly from an insurer. He said insurers typically assess cover eligibility at claims time, while advisers assess risks at sales time, giving customers “clarity and security going forward”.
“Although the AIOFP agrees that the current commission rate of 120 per cent is too high, the LIF legislation rate of 60 per cent is too low and will lead to over 2,000 experienced advisers leaving the industry at a time, which is precisely what it has been designed to do,” Mr Johnston said.
“We believe the inquiry will clearly demonstrate that insurers have used the commission debate as a diversionary tactic to deflect attention away from their direct marketing strategies to distribute flawed risk policies to consumers.
“The intended consequential objective of ‘starving’ advisers out of the industry is un-Australian and should not be condoned.”
Mr Johnston added that Senator John Williams will be at the AIOFP conference in November this year to hear adviser views on life insurance companies. There will be a panel of experienced risk advisers to convey the information, Mr Johnston said.
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