The Finance Sector Union says an extension of the best interests duty within the FOFA reforms to cover all financial institutions will improve the provision and administration of life insurance policies.
In its submission to the life insurance inquiry, the FSU said “all remuneration systems should be structured to encourage and reward meeting the customer ‘best interest’ duty”.
“All forms of conflicted remuneration should be banned from the industry, including from executive remuneration systems,” the submission said.
“This ban should be straight forward and not complicated by loop holes and exemptions provided through the artifice or manufactured ‘balanced scorecards’ or similar devices intended to circumvent the best interests duty.
“We say this because of the evidence that the management culture relegates all non-sales considerations on an operational basis most of the time.”
The FSU noted to the parliamentary joint committee on corporations and financial services that, over the past decade, remuneration systems across the industry have shifted to performance management systems that primarily reward volume sales outcomes.
“These performance management systems make it clear to all employees that your value as a worker is based upon your ability to sell,” the submission said.
“Employees who do not achieve their volume based sales targets are routinely humiliated in meetings and on league table displays.”
The FSU also said legislation should impose greater transparency, requiring all companies offering life insurance products to “annually declare on their website how many claims they refused to pay as well as any adverse findings from relevant jurisdictions”.
Further, it said the removal of sales-based remuneration systems should not be used to reduce costs.
“Rather, the money should be redirected towards the implementation of the skill-based remuneration framework that professionalises the industry,” the submission said.
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