Further changes to life insurance commission caps could see up to 87 per cent of financial advisers stop providing standalone risk insurance advice, “decimating the life insurance industry and exacerbating the nation’s underinsurance problem”, ClearView has claimed in its QAR submission to Treasury.
The financial services company conducted a survey between 20 April and 23 May 2022 which found that 67 per cent of respondents would stop providing standalone risk advice and 20 per cent are unsure if they would continue if further changes were made to life insurance commissions.
Participants also said that the contentious Life Insurance Framework (LIF), introduced in 2018, had “no material impact” on advice quality and actually hindered advisers’ ability to serve clients.
Just 5 per cent said LIF did have a material impact on advice quality.
The survey also found that 70 per cent of advisers do not plan to change the way they charge for life insurance advice; 17 per cent are unsure and 13 per cent are willing to change.
“Advisers are often the ones most impacted by regulatory change but historically, their voice has been drowned out by the large institutions and their industry bodies,” ClearView managing director Simon Swanson said.
“It is clear from our research that advisers are extremely engaged and want to play an active role in shaping the policies that affect their businesses and livelihoods.”
ClearView’s QAR submission is calling on Treasury to simplify advice processes and not make any more changes to life insurance commission rates in a bid to improve accessibility, affordability and quality of advice for Australians.
Mr Swanson added that consumers should be able to choose how they pay for life insurance.
“LIF is not perfect but it is better than some of the alternatives that have been suggested including a complete ban of commissions,” he said.
“Further changes are unnecessary and would have many potential unintended consequences including fewer people seeking professional advice, fewer advisers providing life insurance advice and the financial cost of caring for the sick and injured falling back on families, society and the government.”
The QAR, to be conducted by Michelle Levy, will be provided to government by 16 December this year.
A “Risk Specialist” is nothing more than a commission-based salesperson. It is not possible to comply with FASEA obligations whilst “advising” on only risk products.
How rude is it that risk writers want to actually get an income.
Question is – would you pay for a SOA for a risk product?
Answer – most people would do it wrongly themselves and cut out the middle man.
FACT – Our FP business completely abandoned risk insurance advice and products from our APL and offering when the commissions were reduced to 60%. We did this not because we would earn less in commissions but because the product providers watered down the definitions of cover and increased the premiums. That’s the direct impact this has had on our clients and more importantly, all Australians!
Ours too. Insurance advice can survive one or two of the following in isolation:
– reduced commissions
– reduced product quality
– increased clawbacks
– increased premiums
– increased regulatory complexity
But it can’t survive all of them at once. That’s why insurance advice is dead.
If the commission goes, so do I