The AFA has highlighted a number of concerns with the parliamentary joint committee on Corporations and Financial Services’ report on life insurance.
The 200-page report, released Tuesday, 27 March, outlined the parliamentary joint committee’s (PJC) recommendations for changes to the industry.
In a statement sent to members, the AFA highlighted concerns with a number of these recommendations, including:
- The suggestion there are ‘hidden payments’ in the advised sector and that all payments be reviewed.
- The recommendation that ASIC audit 20 per cent of risk advisers every three years.
- The recommendation that all advisers subscribe to the FSC life code of practice.
- The failure of the report to meet the terms of reference to deliver an assessment of benefits and risks associated with direct, group, and advised life insurance.
“Whilst the AFA is in favour of scrutiny of the life insurance industry with an objective to achieve better consumer outcomes, we are surprised, perplexed and disappointed by a number of aspects of this report,” the statement said.
The statement said the report’s suggestion that there were hidden payments in the advised sector “is surprising and not substantiated anywhere in the report”, and the push for an ASIC audit of a fifth of the industry each three years has no basis.
“We are amazed at this recommendation given there is no new evidence or reporting referred to other than what was previously available,” the statement said.
“Such a program will duplicate audits performed by licensees and will add significantly to the ASIC Funding Levy that each adviser will need to pay.”
Forcing advisers to adhere to the FSC life code of practice would also be “impractical”, the statement said, as all advisers will soon need to subscribe to the FASEA code of ethics and be covered by the Tax Practitioners’ Board code of professional conduct, in addition to their industry associations’ codes.
Further, the statement said the report “fundamentally fails to address” the objective laid out in the terms of reference for comparing the benefits and risks associated with the different models of insurance.
“Instead, it merely rehashes reports and research in relation to retail advised insurance and advice that have previously been comprehensively addressed by the government through FoFA, the Life Insurance Framework and more recently Professional Standards Legislation,” the statement said.
The AFA said it would prepare a formal response to the PJC report following an analysis of its recommendations and engage with politicians to address its concerns with the report.
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