The Choice and Access to Life Insurance (CALI) campaign includes representatives from TAL, Zurich, AIA, MLC Life Insurance, the AFA and FPA and has commissioned research from industry consultants NMG Consulting that shows regulatory disruption has restricted access to life insurance for consumers.
“Significant demographic pockets of underinsurance are already emerging, with one in five younger Australians aged 25–35 currently considered underinsured compared to community expectations,” a statement from the campaign group said.
“Similarly, 20 per cent of middle-aged Australians have less life insurance than levels the level the research shows the community believes to be necessary.”
The paper highlights the impact of commission reduction in particular on insurance advice, saying that “most ordinary Australians cannot afford to pay an upfront fee for financial advice, and, if trends continue, may not be able to access a financial adviser to help them identify their life insurance needs”.
“On the current trajectory, within three years, only the wealthiest 15 per cent of Australians will be able to access life insurance with personal advice,” the group said.
CALI group members said they were “calling on the government to take the research findings into account when considering future policy decisions” in the life insurance sector, “to ensure the right life insurance and access to affordable financial advice is available to all Australians, now and in the future”.
AFA chief executive Philip Kewin said the campaign was “about ensuring affordable advice for all Australians”.
“In such uncertain times, people need to ensure they have the right protection for themselves, their families and their businesses. Access to affordable professional advice is critical to ensure people have the right cover at the right time,” Mr Kewin said.
AIA Australia chief executive Damien Mu said the results of the group’s research revealed “how important it is for decision-makers to consider the impact of life insurance regulatory change on everyday Australians”.
“We need to ensure Australians have access to quality advice and choice to meet their protection needs,” Mr Mu said.
Zurich Australia chief executive of life and investments, Justin Delaney, added that the campaign was an “exciting” opportunity to “reset how we as an industry meet the expectations of consumers and the community in a modern context”.
Zurich Australia chief executive of life and investments, Justin Delaney, added that the campaign was an “exciting” opportunity to “reset how we as an industry meet the expectations of consumers and the community in a modern context”. FSC insurance company cartel speak for looking at other ways to distribute insurance and shaft advisers.
Before advisers get excited about a return to higher commission or reduced claw-back arrangements I suggest you read the 13 page CALI report and the 65 page NMG consulting report which can be found on the Risk Info website. No good news there just the usual FSC posturing and dictating the argument for “new channels of distribution”? see page 12 of the CALI report.
On page 63 of the NMG report it shows Aust initial commission is 60% and our lapse rate is 15%. However in NZ the initial commission is 190% and the lapse rate is 12.5% while in the UK the initial commission is a whopping 200% plus with a lapse rate of 8%. It doesn’t appear that higher rates of commission automatically lead to re-writing and higher lapse rates elsewhere, maybe it is just the incompetent management running the Australian businesses that have no clue?
Maybe we should all move to NZ? 3 x upfront commission and about a third of the compliance from what I hear.
I have been observing NZ for some time. Why is it that NZ seems to always outdo us in the common sense department. They segregate risk advice edu levels and compliance from fin planning as well. That makes total sense but oh no we couldnt do that in this country 🙁
so only when new insurance sales fall that the life insurers realise the failures of LIF.
What a disgrace.
I still remember all of the BDM’s coming out with their clever little spreadsheets to “help” you calculate how much more business you would have to write to earn the same or how to calculate what additional fee you should charge the client. We told them they were dreaming. They didn’t believe us. Now they do.
Yeah that was classic spin. Sucked in.
Until they get rid of SOAs and increase commissions to 150%/30% I wont be writing any new business for these leeches. Now go back and swim in your swaps.
EFing idiots the lot of them. About 10 years too late to wake up.
No insurance BDM is welcome in the practice. Will not write new insurance if I can possibly help it and if client decides they want to cancel insurance due to cost increases, we file note and action.
And not address your Best Interest Duty? Strategy; cross you fingers and hope nothing serious happens to your client that will undo you great financial plan!
Is best interest duty telling people to keep policies that are getting unaffordable? No thats in the insurers best duty, the client’s best duty is aligned to thier goals, not to product. Risk bdm, go do a preso somewhere to sell your snake oil, leave the real client business to us..
Absolutely not. Just saying I’ve assisted many great advisers deliver great advice and their promise, cheap shot. Yes Insurance cost a lot of money, but if something happens, it can protect families and I have plenty of examples. I so over Financial Planners not respecting risk advice or risk advisers, the foundation of any good financial plan is having an appropriate risk management strategy! Please be respectful, if a plan doesn’t address this the best financial plan fails!
Yes I agree “The Best Interest Duty” is to ADVISE the client they need Life/TPD/Trauma/Income insurance, its NOT to organise it for them, unless you get paid for the work that is needed to get new business on the books why would want to waste the effort. FASEA & Best Interest Duty is all about ADVISING the client they need the cover, LIF reforms is about how we get paid, so if we advise them they so have it then we have meet the FASEA & Best Interest Duty requirements.
[quote=Peter S.]No shit Sherlock![/quote]
The best response yet!
Even more evidence that these adviser associations really are in the pockets of larger institutions. The whole point of any body that claims to be an advocate for planners is they stand up and say this won’t work or that’s wrong, or they are leader and say to members you need to change. They don’t ebb and flow with product manufactures whimms. Professional associations don’t bow down to product manufacturers and agree with them because of a fear of missing out on large payments and list of advisers names. You can whinge and complain and write here, and say “I told you so”…. but then to remain a member now of the FPA, geez, that really shouts mountains about your own morals, values and ethics. We all need to reduce regulation to increase access to advice and I hope you’ll join me on encouraging people to leave the FPA.
Yes the whole point of these bodies is to stand up for their members, ah but alas Brad Fox was in charge of the AFA at the time and he was useless. I went to a national conference 2 years ago where he was a PAID speaker and his whole speech was centred on “going along with change – circle of influence & circle of concern “. They longer he went on the more angry I got until I was openly saying what a load of bullshit and is this why you did nothing to stand up to LIF? I had to just stand up and leave it was so bad. This guy is a leach on our industry!
Gee. Gobsmacked. Didn’t see that happening.
So NOW they all collaborate?? Are you f@#$ing joking? It took the mortgage industry about 24 hours to all collaborate together when their commissions ‘d-day’ came up. The FP industry not only didn’t collaborate, the life companies all wanted it to screw advisers with the mistaken belief they would max their profits. The FPA were gutless at best. Then they all believed some idiot lawyer who had no clue about how to run a business, probably never seen a balance sheet in his life dictating how we should all take a loss on insurance business and it would all be fine.
Oh, and of course premiums would all reduce, consumers would be happy to pay a fee and/or they’d be better off with over the phone rubbish policies. All in the name of ‘evil’ commissions and a flawed report from ASIC who had a pathological hatred for planners and commissions from the beginning.
Too bad, too late. Glad I’m out of the industry and thanks all for f%$%ing it all up.
Well said. A bunch of absolutely useless people pretending to represent this industry and going on about professionalism when they themselves are 100% unethical and conflicted in everything they say and do. Hypocrites. NOW GO REAP WHAT YOU HAVE SOWN!!!!
I can write your study for you and save you the time and effort.
1. ASIC contacted us to find out which advisers had the highest lapse rates. ASIC write fictitious report 413 to get some funding. We did nothing and hid the real lapse rates across all advisers.
2. We got in a room under the guise of the FSC and agreed to slash commission rates and increase clawback periods so that we could increase profits. The bank owned insurers so that they could increase their sale prices.
3. We didn’t care if risk advisers would go to the wall because we would be able to sell more junk direct insurance for more profit.
4. We got the LIF passed. Celebrations all round for the FSC.
5. ASIC forced us to pass on the correct lapse data after the LIF was passed. ASIC admit they got it all wrong.
6. Royal commission. Our hopes and dreams for junk direct insurance killed off.
7. New business starts to fall. Advisers can’t afford to write risk under the LIF rates and customers don’t want to pay fees for advice.
8. We start endless rounds of premium increases for existing customers and say that this is because of claims experience. Lapses start increasing.
9. We start giving high discounts for new business for the same products we say we have increased claims for. We try and encourage advisers to churn business. It doesn’t work. Our lapses keep increasing.
10. New business plummets. We become desperate. We don’t want to admit we got it wrong. We don’t want to give up the LIF rates. Lets blame over regulation instead of ourselves.
11. ASIC push back their promised report for 2021. ASIC don’t want to be blamed so they will use Covid as the excuse.
12. We are desperate now.
WE know it’s you Sally…don’t hide behind “Anonymous”! haha!
Brilliant!
Just remember, Sally earns more than most of us now!
Please, who is Saly??
SPOT ON!!!!!
Thanks for your insight, your honesty….but put your real name up on this site, admit who you are and stop hiding to protect your job!! Otherwise you are just guilty and gutless.
Happy to corrected…. within this period of LIF being implemented most or maybe all the insurers tied to the big 4 banks have in some capacity been sold on or changed hands…. now that their business is completed… we are now having sudden regrets?
Oh, who would have thought? Oh that’s right, all the advisers working in the personal life insurance space that said this was exactly what would happen when LIF was introduced. Instead what we have seen is poorer support for advisers, a reduction of commissions which means it’s only affordable to provide advice to older, larger insurance needing clients and an increase across the board for that same cover as insurers need to keep their inflows up due to a reduction in new clients.
The next thing we are going to be hearing about is how the quality of insurance books has declined as the only people retaining the now more expensive insurance are those with health issues that think they will have a claim in the future.
The irony is, most of those insurers mentioned in this article were all in support of the LIF reforms, even though advisers pointed out this is what these reforms would lead to. They were banking on getting direct insurance at the time, regardless of how many times it was explained to them, without advice clients would all under insurer as they don’t understand the needs to cover.
What used to be bread and butter for advisers has become an unprofitable compliance mess. And they wonder why I hardly write risk anymore. Doing a rare case at the moment which is proving to be painstaking. Such a shame as we have all seen the benefits of quality advice which has helped many families in times of need.
Cause and effect.
The lowering of commission reduced new business and adviser numbers.
The insurance companies book of business is aging with a higher claims ratio.
The passing of an uninsured life generally speaking results in a social security ramification.
All stakeholders (constituent, adviser, insurance company and government) would benefit from a significant increase in new business.
Action is required.
Where was the Best Interest Duty to the clients from the insurers, politicians and academics… and what about the severe Conflict of Advice from the creators of FASEA.. WTF
Hypocrite is just not a strong enough word. The FSC and O’Dwyer drove a truck through an entire industry and be damned with the consequences. The consequences happen to be; dead people who couldn’t afford insurance premiums or advice and an entire industry on its knees. But who could have foreseen the destruction…
OH yes the great O’Dwyer. What a train wreck she has left behind. Well done. CLAP CLAP CLAP. But don’t worry she will live happily ever after on her politicians pension. No responsibility no ramifications No Worries Mate!
Didn’t she take a job at NAB too?…. nah nothing dodgy here, move along.
Why are you not printing my comment which is factual and I am prepared to put my name to it. This surprises me.
Hi Peter, I had accidentally missed your comment in between some other ones, it’s up now! – SK
This was predicted…..now its reality.
The irony of the Australian financial advice landscape, be that risk or broader financial advice, is that the only people who can now afford the process arguably don’t need the advice, inasmuch as they have the financial resources to tough it out without the advantage of advice. The regulators must be well pleased with their work!
Could IFA Journos seek out Mr Trowbridge for a comment?
This guy was the biggest waste of money ever.
Brilliant. I suspect the silence will be deafening.
LIF was designed by FSC and ODwyer to kill Advisers to allow Institutions to flog more Dodgy Direct Life Insurances.
Once Dodgy Direct Life Insurance got slammed at the RC, they were stuffed.
Oh yeh how about we try to get those Advisers who we shafted to do their job again, no bloody chance at half pay.
Nice work FSC and ODwyer, what an absolute mess.
The reason for the LIF reforms had less to do with making the industry improve as opposed to the sale of a business at an optimum price possible. Regulators were complicit in this endeavour. So with reduced commissions paid, the possible elimination of trail commissions for LIF to be a subject of review and the undermining of advisers, this has now resulted in less business being written across the board and the cost for advice going through the roof.
Since LIF, we have seen CommInsure sold to AIA, OnePath Life to Zurich, Asteron to TAL and sales of wealth management businesses owned by institutions, sold at greater multiples. Premiums promised to be lowered for risk have instead climbed significantly. This now compromised further with less favourable terms for consumers from 1 April 2020 and the Covid19 pandemic and all economic factors since. In other words, a colossal mess.
While the above was occurring since the start of LIF, it seems the AFA FPA insurers, regulators, ministers, and their bureaucrats, all overpaid, could not see where LIF and other measures were going ?
With eyes wide shut, the disaster is now unfolding. How incompetently foolish are these people in charge, you may think. Unless of course, all are complicit in endeavouring to bring about this outcome for the benefit of the members of the Financial Services Council.
Afterall, if the result of insurance is to ensure less pressure on the taxpayers purse, why would you as a member of any of the above cabal not want other than good public policy by ensuring consumers can protect themselves by seeking quality and affordable advice?
The answer is simply profit at any cost. Regardless of your efforts, regardless of decency, regardless of integrity and the need for the good of the consumer. Remember the words of FOFA, which was to make advice accessible and affordable to all Australians. Clearly this is now a very sick joke.
If you are an adviser, please do not support the AFA and FPA. They are not deserving of your respect and appear to have sold out advisers significantly.
If you are an adviser with any member of the FSC, leave. They will hurt you at any cost and impose draconian measures to undermine you at every step in your advice process.
As a voter, I would encourage you, your staff, your clients, friends etc to NOT vote for either of the major political parties. They are worthless and incompetent.
Finally, may I encourage you as an adviser to remain loyal and informative to your client. There has never been a greater time for your need as we are clearly now heading into an economic mess, again bought about by an anaemic and confusing approach to this pandemic and sheer economic vandalism.
Totally agree. I would say though, the AFA did actually oppose the LIF rules at the time. Unfortunately they were ignored at governmental level as the FPA directly opposed their position and due to it appearing infighting within the industry their submissions were ignored.
Truth is that the FSC shot themselves in the foot. Nobody, including the consumer gained from this exercise, now the life offices have realised that theirs was a hollow victory. Hard to feel sorry for them when so many people were affected by misinformation spread regarding commissions and other issues.
No shit Sherlock!
“Clowns to the left of me, Jokers to the right, here I am, stuck in the middle with you” not sure what other outcomes could have been anticipated. Another study to explain how the consumers and advisers got shafted by the fulfilled wishes of this “gang”. By the way the wealthiest 15% will be just fine without insurance!
Very clever.
The FSC and Sally Loane made sure LIF became a reality and now some of the insurers named are now bleating! Boo hoo hate to say it but we told you so…
Insurance companies were happy to go long with until they got caught selling insurance directly over the phone. Why on earth do adviser who recommend great quality Insurance have to complete SOA and a general insurance and mortgage brokers Group insurance can sell insurance junk insurance and with no soa’s
k of approval. But that’s all. I’m wanting it to be as good as it sounds. I am hopeful a ‘reset’ (whatever that will look like) is going to benefit advisers as well as clients. The life insurers have been lukewarm at best helping adviser (a few exceptions but not enough). I hope whatever they do it is done in time to stop GOOD experienced RISK advisers form leaving the industry because they have ti sit a badly conceived, slovenly designed and carelessly implemented FARCE-IA exam. As if an adviser of 35 years with ZERO client complaints and a top reputation needs an ‘ethics’ exam. What absolute rot! The clandestine agenda of the academic community that has hijacked our once-great industry is obscene. This abject nonsense must be stopped – the exam is a insult to established advisers and they deserve much better treatment for all their decades of devoted client service.
.
The real kicker is the simple risk adviser must do this totally over-the-top AQ7 degree – full financial planning. Totally unnecessary for an adviser who just wants to continue to write simple risk products to protect average Australian families with simple insurance needs. Knowledge about derivatives, CFD’s, international currency exchange and a raft of complex subjects are clearly not required for a risk adviser. The Machiavellian insistence the govt and industry bodies are continuing to force on risk advisers that they must do all this speaks volumes about their intentions and NONE of it has to do with a better outcome for the client as it imply will NOT have that outcome. It will drive risk advisers OUT and leave clients to look after themselves to source and claim on valuable family insurance. It is a travesty that, as usual, govt is making worse. No wonder whatsoever that a large percentage of GOOD and EXPERIENCED advisers WILL leave their previously cherished industry in December 2021 and most of the rest will go in 2026. Those responsible know intrinsically who they are and they should be bitterly ashamed of themselves.
Dear IFA, please repost this everday next week! Great article.
Everyone but ASIC and the government knew the LIF was 100% wrong and that it was based on false information.
ASIC lied.
Yes it’s a sad day when advisers are too afraid to mention their real names for fear of retribution from the Government regulator, but this is where we are at these days. How did a country like Australia end up like this?
So what advisers said would happen, did happen. The insurance companies who rubbed their hands with glee knowing they would pocket commission savings instead of passing them through to clients have seen their profits disappear. New business has disappeared because there is no profit for advisers to sell insurance due to ridiculous red tape and compliance and reduced commissions, and clients are only buying junk insurance over the phone. The big insurance companies begged the legislators for these changes under the lie of churning. It is a bit rich now to be complaining about the mess that they created.
Surprise, Surprise, someone with half a brain could see this was going to happen, but as usual, the bureaucrats and politicians think they know it all when they have absolutely no idea in what they are making changes too.
I have always maintained and told my clients that this would be a disaster, and as usual, they have delivered and along the way destroyed business and seen a mass exodus of quality advisers from the industry who have between them thousands of years of experience in serving and protecting their clients., reminds me of the Titanic.
Is this a back flip? But well done insurers for admitting your attempts to crush advisers were conceived solely in self interest.
In such a short period of time after the radical restructuring of life insurance commissions evidence is pointing to a worsening of the under insurance issue and advice becoming less assessable to those who can least afford it but need it the most. ASIC’s review in 2021 should come to an immediate conclusion, reinstate commissions to max 80% upfront with a further review 5 years later. Introducing FOFA, FASEA and educational changes concurrently has resulted in a mass exodus of skilled advises these four factors if not revisited now will
result in damage to the life insurance industry that will be irreversible. Reform was necessary but the levers of reform were used excessively. The regulators must realise this error and correct it now , you will be respected by all stakeholders in making this essential adjustment at the right time.
Agreed but we all know there is no way ASIC (who hate commissions) are going to recommend increasing something they despise.
Too late. Horse has bolted.
I have “never” meet a single adviser (other than those who work in the top 1% of wealthy clients) who ever for more than 1 second believed that LIF was “EVER” going to deliver the lofty ideals of those who pushed this reform.
It was ill conceived and poorly executed.
When WOL was removed from the product suite the rot set in. Chasing cheap premiums and market share (I blame the banks for this) became the mantra. Advisers were actively encouraged to write more and more new premium which is impossible to properly service.
An immediate return to a minimum of 80/20 (&12 months commission responsibility) is urgently required to address the imbalance of affordability for advice .
And if anyone has the foresight to bring a new Cap Guaranteed WOL / Endowment policy to market we may see a return to safe, profitable and respected life offices again. (I somehow don’t see it happening though)
The same errors in judgement as a result of the Hayne RC will necessitate a roll back of some of those changes as well.
Mainly in the areas of compliance complexity.
This is what happens when consultation is given lip service and those who know through many years at the coal face are blatantly ignored. We (advisers) actually welcome sensible reform and innovation, but what we see now is a disaster brought about by politician’s looking no further than the next parliamentary cycle and a regulator who was asleep at the wheel in a fit of missionary zeal determined to make up for decades of incompetence and laziness.
Because all of this is way above my pay grade my thoughts and suggestions will be ignored, after all what would I know free nearly 40 years of sitting across the kitchen table talking to young families? Even with those appalling adverts for (un) Real insurance are so misleading, and the product offering so crappy (and more expensive that advised cover) there will not be any meaningful “fix” for the under insurance problem.
With commissions a more valid and workable financial planning offering will become more affordable to many more Australians.
Very insightful.
Nothing short of 200% upfront commissions will save these fools now. This is what they had to do in the UK but hey the Australian government and regulators did not want to open their eyes to history and learn from it.
Brilliant. It’s about time there’s a push back from industry and adviser groups. The reform process over the past few years have been a car crash led by uninformed bureaucrats guided by ideology rather than reality, despite having the opportunity to refer to overseas examples. We’re now in a situation of considerable underinsurance and skyrocketing premiums, which will only serve to exacerbate the problem moving forward. All of this as we make our way through a global pandemic.
Who would of thought that cutting off remuneration to your main distribution channel, being forced to close direct sales channels after their selling scandals, and removing young people from the group pool would have got us to this point?
I know… advisers. That’s who. The ones who are working with their clients to establish their insurance need, getting them the best pricing and terms, adjusting their cover as they move through various stages of life and most importantly fighting for their claims (without charging a $45k ‘win’ fee).
But nobody thought to ask advisers.
Hooray Common sense at last and a united front
Well surprise, surprise. This all started with the Trowbridge report, far from accurate, where the industry have successfully shot themselves in the foot. No gain for the consumer or the advisers, plus now lack of confidence in our associations.
F&@kwits! If they’d listened to the real coalface experts when they started this sh1t several years ago Financial advisers asked repeatedly, over and over, one question “how does / will restricting commission benefit the consumer?” Their silence was deafening. Now because EXACTLY what we said would happen, has happened the greedy b@stards want a reset…well here’s a newsflash for you. There are almost 7000 fewer advisers still in the industry and hardly anyone entering. And yes! This happened in the UK and other countries. It took more than a reset to get things going again. I hope your pockets are deeper than your intellectual levels..,commissions are three times higher than they were to start with! Good luck trying to win back trust. Your reputation lies in tatters just like we said it would.
So in other words, what we all knew, what all advisers said would happen. Where are all the overpaid “consultants” that had NEVER sat infront of clients now, who preached to us about providing risk advice? Where is the CLAWBACK on the consultants, where is the CLAWBACK on the overpaid Insurance execs WHO BIT THE HAND THAT FED THEM!!!
Anything under a 90/20 setup, is destined for failure, let’s just see if they can now leave behind their egos and put life support back on the industry.
TRY 200%/50%