The recently announced changes to the life insurance industry have been driven by the need to put the consumers’ best interests first and to regain community trust in the life insurance industry.
Since the release of the independent final report prepared by John Trowbridge and the ASIC investigation, the life insurance industry has been challenged to come together and address the many complex issues raised.
Key recommendations of the Trowbridge Report in the wake of the ASIC investigation revealed higher lapse rates and high upfront commissions directly correlated to poor advice, and misalignment between incentives and distribution channels. This clearly is not reflective of all advice or advisers and is a case of the few versus the many. However, it is clear that a correlation between high commissions, lapse and perceived poor advice exists. Therefore, the industry needed to act and do so quickly.
The recommendations were founded with a view to increase the quality and sustainability of the industry and are reflected in the reform model.
What was made clear from the start was that industry had one last chance to find a way to make acceptable change. If we were going to achieve any meaningful change as an industry, we needed to reach a consensus between advisers, customers, clients, insurers, regulators and government. Consensus was critical to achieving an outcome.
The recently announced reforms are an important step in providing clarity on an industry-led response to the recommendations. But more importantly, they are an important step towards rebuilding confidence and trust in a sector that has been lost in recent years.
At the heart of these discussions has been the need to reach agreement on how we can ensure a sustainable advice industry which supports access to quality independent advice and adequate life cover for all Australians.
For consumers, we believe their best interests are served by having a robust market that supports choice, access to quality advice, independence, innovation, competition and value. We believe the reforms support these interests.
We believe these are positive changes that need to be made to strengthen our industry for the future, but this is just the start.
We need reform that enables us as an industry to move forward to address the other key recommendations of the Report. These include measures to support choice on Approved Product Lists, the introduction of a code of conduct aimed at setting standards of best practice for insurers, licensees and advisers and improved reporting for the industry.
These broad structural changes will have a significant impact on our industry and in particular advisers, so support from life insurers for advice partners will be critical during this time of transition.
The changes proposed will require industry to review the whole offering including product design, structure, process and systems and we expect to see significant changes in each of these areas.
It has taken us as an industry a while to get to this point, but we believe that a partnership approach, now more than ever, will be paramount to achieving a successful and sustainable industry for the future.
Damien Mu is chief executive officer of AIA Australia
Couldn’t agree more fellow advisers!
Its been absolutely disgraceful that advisers have had the ‘conflicted remuneration’ finger pointed at us the last few years when the truth of the matter is its actually the executives at institutions and insurance companies who are conflicted that have devised these reforms.
It’s you Damien and your peers that receive massive bonuses of hundreds of thousands of dollars each year for your annual premium inflows that devised these for the sole purpose of protecting your own financial rewards. It has next to nothing to do with the actions of honest advisers like me.
And Josh Frydenberg bought the con hook, like and sinker.
Nobby is spot on – PAYG mentality judging people who had the guts to leave the nest and build their own business by working hard and earning a commission for doing so.
Your incomes wouldn’t exist if it weren’t for advisers doing that and now you bite the hand that built the business that now feeds you. I find it incredibly insulting that you aim these reforms at advisers. We are not the problem here at all. Its the ugly greed of big business that caused this.
Damian there was a fellow Chief Executive Officer who left AMP in recent years,an American I recall, who was paid a million dollar plus salary and then received a million dollar plus bonus when he left despite the AMP share price tanking during his tenure. What has been done about that ? Perhaps you could start this discussion with your fellow chief executive officers ? Can you justify your remuneration package or is it time that you fessed up and gave this excess pay back to policyholders ( who pay your salary ) via lower premiums. Recommend that you start with a 50% cut before regulators come in and force you to do the right thing.
Once again, some-one who has never had to risk everything to earn an income telling everyone else how good this is as an outcome.
Grandstanding as the CEO and sprouting trivial garbage for the sake of posturing, you may just as well be the BDM delivering the company line.
So Damien, for the benefit of our industry, lets make the next step a review of all the salaries of all the life insurance execs and BDMs (including yourself ). The advising community can give feedback on whether these salaries are reasonable or not based on the value you add to the insurance process. We look forward to hearing from you.
Damien, I wonder how you will feel in March next year when AIA has its quarterly managers meeting to discuss why each state has not made their quarterly sales target. The so called reforms are going to close small IFA’s down, and if the larger writers simply stop writing new business as it’s no longer profitable for us to write new
business, how are you going to explain that to your shareholders?
What was your stance Damien? Was AIA one of the companies looking for this outcome? Were you looking for 20% upfront and ongoing? Where did your company stand? As has already been written below the product providers are nauseating, they are the manipulators of this entire lie, advisers have been set-up right from the start by you & your ilk. I use to write a large % of my business with AIA, that will now change.
The empty words “support from life insurers for advice partners” HAHA what a joke! You are the only winners here, not consumers and certainly not what were YOUR supporters.
Support choice on APL’s – nuh not happening – 6 insurers only per APL. Let me guess that’s the banks recommending the banks and hey nothing changes. If I write $400K next year I can’t bank it for 3 years cos some other tosser can come along and steal it from me. Not to mention I have paid tax on it in year 1!!! Great, I can just carry those losses forward to offset against future losses to offset against…
I guess we now know AIA was one of the insurers who wanted nothing but level commissions put in place.
I’d like the rest to come out now.
what would you know Damien? You have never had to earn your income based on commission only, from your days at Aviva you always had a salary and always a good one, your conflicted interest is in the profit of your company, well what did AIA do through the GFC, did AIA not say it was not associated with its American parent? I guarantee you if the industry goes down this path you will have a lot more losses, how about you take a 50% reduction in your income Damien please set the example for us all.
Damien. Insurers would not be in this mess but for the frolic into Group Super. Get out of Group Super, no one is making a profit there and to attack advisers revenue and add increased responsibility periods is gouging advisers to make up for industry mistakes.
The PR spin emanating from insurers is nauseating
This is not over !!!!!!
Sorry Damien. This is not “just the start’ Ask almost every risk writer and they will tell you ‘it’s the finish’