The Corporations Amendment (Life Insurance Remuneration) Bill 2016 was passed unanimously at 1:01pm in the upper house today.
Minister for Revenue and Financial Services Kelly O’Dwyer reintroduced the bill into Parliament in October last year, saying it would improve the quality of financial advice and boost consumer confidence in the life insurance sector.
The bill passed the House of Representatives in late November 2016.
Under LIF, the rate of upfront commissions paid to advisers will be phased down to a maximum of 60 per cent, with ongoing commissions capped at 20 per cent.
The bill will also introduce a two-year upfront commission clawback period under which 100 per cent of the upfront commission will be clawed back in the first year, and 60 per cent of the upfront commission will be clawed back in the second year, should a policy lapse.
Level commissions and fee-for-service remuneration will remain and be uncapped.
The changes will commence on 1 January 2018 and will apply equally to all life insurance advisers, and will provide flexibility to ensure the reforms capture all life insurance channels in the future, including those that may not be considered to be providing financial advice.
The elephant in the room that everyone is conveniently ignoring is the fact that commissions are always a conflicted remuneration method. Charge your clients for your advice and refuse commissions from Life Offices/Banks and the can’t “claw back” and you are in control. It’s called “business” rather than relying on Nanny for payment. Government and Banks and Life Offices are only doing what you let them do… They are all waiting for the penny to drop and for the professionals to start doing it professionally and taking responsibility for their own remuneration arrangements.
so much for the Liberal Party being the party of small business, they suck,, The Liberal Party has left behind all small business with this decision, interesting that O’Dwyer was Small Business Minister at the time, what a joke.
Both the AFA and FPA loaded the gun and handed it to ODwyer to shoot us with. If you would like a new adviser association then have your say at action@licg.com.au
Time to prepare to exit risk advice.
[quote=Anonymous] And don’t forget the ASIC levy that AFSL now have to pay for their advisers.
You have to ask, is it really worth staying in the industry? certainly a Cost Benefit Analysis may well prove this point with a resounding NO…
Okay so now you have it….in true colors for all to see.
The Life Insurance advice sector has been put in its place with the large end of town receiving the reward the FSC have long being lobbying for. Meanwhile the associations are rendered essentially useless as far as its membership is concerned while the humble consumer is left floundering with no real option to turn to as their advisers will now work more for less, risk losing what commission has been paid and will over time go out of business. The adviser who seeks to charge fees for such advice will need to provide an opt in and fds which is of uselessness to the client. In short what a mess.
Oh, if you are an adviser who says that RISK does not matter, consider your business revenue of ANY percentage is subject to clawback simply because your client has received an increased electricity bill. What a farce.
If as an adviser you neglect looking at risk, you have not satisfied best interest perhaps and moreover if you do consider it, you may lose revenue for a lapse due to unforseen circumstances.
Your business valuation is now lower as a result and you are left wondering why bother at all as you also need to lift your education skill in order to STAY in business regardless of your years of experience. Remarkable.
Meanwhile the damn fools that have come out with this garbage says they champion small business but has also just kicked thousands of small business owners and their employees in the guts. Amazing
So who wins.
FSC members & Insurers – more revenue means more profit, more hurdles for a customer to jump before a claim is valid and less expenses as advisers lose money if over a 2 year period a lapse occurs.
FPA / AFA – with education reforms, they will be marketing courses to all of us
Who LOSES – Advisers as our business is compromised in revenue and valuation terms, insurance may need to be charged for limiting insurance coverage and yes that other person…..the consumer as they will remain under insured, potentially risk financial disaster as they could not afford to get advice or worse, turned to a contract with compromised terms and were not paid when they needed to be…..
The stupidity of politicians that deceive the consumer, cause our industry advisers harm, cause economic vandalism, yet despite their clear level of economic incompetence get rewarded with pensions and benefits is simply breath taking. This is truly a disgusting outcome for not just advisers but more importantly, our clients and consumers in general.
Bravo FSC, Banks and Life Insurance companies, bravo!
You’ve very cunningly managed to successfully deflect the blame, fault and deficiencies of your own internal conflicted remuneration systems to the honest, non-aligned or institutional adviser by pulling the wool over the eyes of a gullible and obstinate Federal Finance Minister who put this policy up.
If anyone is to blame for the concerns consumers and the media have about this industry, its you lot, you self-serving dishonest lot!
Australian consumers will suffer as a result of this today…but you lot won’t care as long as you continue lining your filthy pockets.
Back in the old days the Life offices had a description of this it was called Void Adjustments or clause 31 debits ( i think) it meant that if a policy was cancelled and a replaced with a new one there was an adjustment of commissions made
the Govt are so clueless O’Dwyer clearly had NO understanding of the entire farce and was thoroughly conned by the lobbyists. So where to from here? Do you even bother writing insurance from Jan 2018? The business model simply has too much risk for a small business, but crazily, it will be just fine for the banks and insurers, isn’t that weird?
Well said Jimmy, pity no one listens!
Great job for your other employers, the banks and life insurance companies Minister for Banks & FSC, Kelly ODwyer.
Oh WOW the big end of town now gets to laugh all the way to the Bank now .
If i write a policy for a client and someone else replaces that policy within 2 years, i get a clawback and the person who has replaced the policy gets a full payment for the new business. How is this fair? If this policy is designed to prevent ‘churn’ why am i being punished even when i’m not ‘churning’? (use of the “C” word used only for ease of understanding, not to infer that the practice actually takes place).
Wouldnt it be fairer if advisers replacing a policy were required to provide evidence of when the policy being replaced was first in force. If they are replacing a policy that was written in the last 12 months, then they receive no comms payment, and if it was written in the past 2 yrs they only get 50% comms. That would prevent people churning other advisers business for no real benefit to the client.
If the adviser simply wanted to increase the sum insured they should be able to receive full payment for that, but that might require insurers to improve their systems to make it easier for advisers to increase existing policies, because everyone knows its easy to write new business but bloody hard to get an increase on an existing policy.