Tabling its report on the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016, the Senate Economics Legislation Committee said it believes “the bill contains provisions designed to ensure that consumers can access unbiased and appropriate advice” on life insurance.
The committee then recommended that the bill be passed.
“The committee notes that advisers have thus far been allowed to provide advice in circumstances where their own interest in a significant commission is at odds with the interests of the consumer,” the report said.
“This bill will effectively address unnecessary churning and will ensure that ASIC has greater regulatory oversight over the industry.
“The committee notes the concerns of submitters in relation to consumer choice and the future of the industry, but believes that the bill contains mechanisms to address these risks. In particular, the powers conferred on ASIC ensure flexibility and responsiveness while the scheduled 2018 review provides an opportunity to correct any imbalances or pursue further reform,” the report said.
However, additional comments within the report from Labor senators note concerns from a number of submitters, especially that the reforms will see adverse consumer outcomes, and the industry will see a decline in adviser numbers and an increase in the market share of large institutions.
“These concerns about the activities of large institutions are legitimate and Labor acknowledges the risk that such institutions may come to dominate the industry,” the report said.
“In this regard, Labor draws attention to the instances of poor corporate behaviour that the Senate Economics References Committee examined during its inquiry into the performance of the Australian Securities and Investments Commission and continues to investigate through its inquiry into the scrutiny of financial advice.”
Ashamed that this happened under a Coalition Government condoning collusion and market fixing
So much for the Small Business Effects Test they announced today
Is it time to walk away !
Yep. Just imagine the stories that will abound in 10 years time of consumers who buy cheap crap policies over the internet thinking they have the correct cover only to find the fine print means no claim. This is a catastrophe in the making !!
Comminsure have been diddling people out of claims and ANZ has been screwing people out of money, yet Small Business Financial Advisers are the ones to blame because these companies provide us with the means to earn commission?
Congratulations to the FSC, ASIC, AFA, ALP, LNP and ISA. You have won for now. It was brilliant in how it was manipulated. FSC have an agenda to remove advisers as they “cost too much” meaning, we bring them clients which is great but when they have to pay us to do so and pesky annoying claims get paid when advisers are involved, not so great. So let’s create an “issue,” call it “churning”. Nobody can define it or give a straight example of it but it must be pure evil and let’s make it out to be a bigger problem than it is, we know how small it really is because we keep our stats (unless someone wants to see them). That’ll scare the willies out of them! Let’s then have ASIC conduct an “independant” audit of the situation to show how bad it is. No ASIC, don’t worry about auditing too many advisers, we’ve gone back through our “statistics” (which we don’t have) and these are the advisers you should audit. Oh, it’s only 0.6% of advisers, really? Well they must all be the same then! And we’ll get the Trowbridge report to back it up. Let’s then have the LIF base all proposals on this “audit”, why give people the truth or full information when what you give them what will get the desired result? Now we mustn’t forget the AFA, let’s keep paying them “sponsorship” just to make sure they tow the line and disown their members but AFA won’t mind because we will fill their ranks with employees who will do as they are told. Now, ISA you keep telling your ALP mates how bad we are because nothing good can ever come when not union centric and FSC, you keep telling your Coalition mates that all will be ok as you have THEIR best interests at heart and will get them re-elected. This marvellous outcome means that you FSC members can now push direct products onto clients as they are all that is left, don’t worry about paying claims because the stats we don’t keep tell us we only pay 50% of claims and we make more money year after year! And we’ll do the group plans for ISA too. Yay!
very disappointing.the LIF changes will result in a loss of experienced advisers.
less insurance will be written due to the reluctance of consumers to pay a fee in addition to premiums. Advisers will be forced to charge a fee to make up for the reduction in upfront commissions. compliance costs continue to rise, and advisers become less profitable. LIF will excacerbate churn, not reduce churn. ASIC’s threat of level commissions from 2018 will see both insurers and advisers unviable. The lunatics are running the asylum..
Ben — There won’t be advisers (or at least a lot less of them) so churning will be solved. The client is worse off but this was never the intention of this legislation.
On a serious note I have not been able to work out how much of a cost saving / benefit increase makes changing a policy in the client’s best interest as opposed to churning. Serial churners should get action taken against them by ASIC, which is their job, but if I can save a client $x over 10 years surely a certain level is in the clients best interest and not churning.
What about NECESSARY churning? Has anyone assessed the harm LIF will have on consumers as a result of adviser reluctance to switch a client to a cheaper policy? One insurer is currently rolling out massive price rises for income protection policies. Post LIF, advisers will be incentivised for complacency or charge fees to switch a client to a cheaper policy. How does this benefit the client? The cure will do far more harm than the problem it was designed to fix. Unfortunately the Coalitions love for the banks and Labor’s love for industry funds has seen them form an alliance against independent advisers and consumers are the ones who will get screwed.