Addressing the AFA Virtual Conference on Thursday, shadow minister for financial services Stephen Jones said ahead of ASIC’s 2021 review, the burden of proof in favour of retaining life commissions would lie with the advice industry when it came to future Labor policy.
“In terms of the review of the life insurance sector, I’ve got to say I start with a bias against [commissions],” Mr Jones said.
“I think the burden lies upon the industry at large to prove that a commission-based sales model attached to an advising sector is able to provide a service to customers that is not conflicted.
“I think that’s an enormous challenge – the royal commission made some important findings in that area and it’s an enormous burden to get over.”
However, Mr Jones said he was willing to examine any evidence provided as part of the review, and would consider changing his view if the data clearly pointed towards retaining commissions.
“I want to be frank about where I come into the conversation, but I’m also willing to engage with industry,” he said.
“There have been sectors where we have had a good discussion, such as with the mortgage broker sector, and we’ve looked at the arrangements there.
“These things are never done and dusted forever, but I come to it with a certain view of the world and the evidence will have to displace that view of the world.”
Mr Jones said Labor would ultimately be guided by the outcome of ASIC’s review and that he was willing to have his view on life commissions “rigorously tested”.
“It would be silly to say we need this research but before any of that comes out, I’m going to form a view and not listen to what the research said,” he said.
“So I am starting with a position, but I’m willing to have that rigorously tested.”
So if Labor eliminate the Risk Industry and his Union mates get their way and all insurance is written inside Super, what will that do to Account Balances or will ASIC go after them
The slow and painful death of the Retail Risk market is happening before our eyes. People making the decisions have limited experience and understanding.
A simple answer you will understand Mr Jones—I WILL NOT VOTE LABOR IF THAT IS YOUR POLICY
People don’t like paying a fee for service for insurance. I’ve offered this option for some time with all insurance clients when positioning commission vs plan fee. Invariably they choose commission as insurance is a ‘grudge purchase’. They do this even if the up front cost works out cheaper overall, because they still have to shell out a significant amount of money to cover our time to prepare and implement recommendations.
Insurance commission also serves to ‘even the playing field’ when it comes to claims and work involved with establishment of policies. With commission, one may write a plan for a customer who pays $1,000 up front, even though a great deal of work may result from this client to implement the plan (back and forth with doctors, chasing up paperwork and so on). On the flipside, you may see a client who is relatively easy to implement / underwrite, but pays $10,000 in commission due to higher amounts required. When it comes to claims, the total ongoing pool of commission being paid to the business allows us to help customers in their greatest time of need without having to charge additional fees. The principle here is that some cross-compensation occurs, just like it does with private hospital cover.
Given that ALL advisers must now comply with the FASEA code of ethics, surely this will cover advice where an unreasonable level of cover is recommended in order to gain a higher commission? Most advisers are decent people who are simply trying to help others, and given the requirement to comply with the code of ethics, a plan will have to be constructed with the client(s) best interests at its core.
Removal of commissions will be the final nail in the coffin for this part of the industry. The end result WILL mean more people relying on Government assistance (whatever that aid happens to be at the time – invariably an inadequate amount for those suffering serious illness or injury) during what is often the most difficult time of their lives. If this is what the Government wants, then it is what they will get. If not, they will need to look long and hard at this, and approach it with objectivity, not an end result already in place before they have even commenced their enquiries.
Commission is simply a means of payment. Just like [i]any[/i] form of payment, it is not inherently bad or good, it is simply a way for a person or business to be compensated for their time.
Another clueless soul interfering in something he knows nothing about.
I bet he’s never even done the due diligence of going through the process with an adviser himself, where he witnesses first hand just how much (damn) admin and compliance overkill advisers have now and how long the (possibly totally unpaid) process is but then had the option at the end of it all to either pay a separate fee to the adviser or simply allow the ‘commission’ remuneration method to take care of it for him.
These politicians (and the media) simply have to stop associating their incorrect perception of ‘commission’ to what it is and how it functions in this industry.
None of them understand the claims process or the enormous amount of work we now do.
I wonder if any of them realise our money stops too when claims happen. I’ve had 4 clients on claims now for 4-5+ years and haven’t received one cent payment for them during that time.
WB – that is a great idea. Mr Jones says he is willing to engage. Why not make him the offer to sit through a few rounds of advice. I think that’d be brilliant! Do it!!!
And yet the commissions that industry super (union run) received from negotiating worse benefits for members but at increased premiums (of which their slice of comm also of course got bigger) with their insurers is fine? As per another commentator on here, Stevie = muppet.
Interesting that Stephen Jones says that the burden lies with the advice industry.
It doesn’t.
It lies with the insurance companies and with the government. Do they want Australians to have life insurance or do they not?
If yes, then are we competitive selling a complex product? If we are, then the client is not paying too much.
If we are competitive, are the clients harmed by paying the only way they are ready to pay for insurance advice – through commissions?
Some clients are – they are sold too much or too little cover. Many clients benefit – each time an adviser gets no revenue or too little revenue for the work they did.
Does eliminating this harm outweigh the harm to people, their family members and the government from people not having enough insurance cover?
I am not optimistic. A lot of people lost their cover unknowingly in the recent measures and were devastated when they couldn’t claim. That could have been minimised by only removing insurance cover from second or third or further super funds – not an easy exercise to implement but entirely possible.
The papers are not full of stories about people who unknowingly lost their cover so ideologues could well win this one.
If you have a rigid compliance regime in place and clients are being given advice based on their needs, I see no issue with commissions being paid.
Australians are under insured and insurance is not something that people wake up and say ‘gee I am going to go and buy insurance’ Professional insurance advisers are very good and needed
Whilst Labor keeps referring to the royal commission, the facts are that the Royal commission was not there to showcase all the great work that has been done by advisers, it was there to highlight a small number of shonks that did the wrong thing, however, if the compliance regime was good, it would have picked it up and these shonks ousted out of the industry.
The majority of Advisers that sell insurances do a fantastic job, there there are many families and businesses that have been saved as a result of them having adequate insurances – which generally goes unnoticed
“commission” is a dirty word…that was my prediction in 2009. If only you had better representation by the FPA and also did an Insurance Course at TAFE, things would have worked out better for Old Risky. We all know commissions have there place and can be suitable, just look at mortgage brokers. The key difference is that mortgage brokers have an association that works only for the brokers, and not for the banks (unlike the FPA). Brokers also had to do a Certificate in Mortgage Broking whilst OLD Risky bucked education at every stage, expected the FPA, OnePath or MLC or Comminsure to look after him, and now looks what’s happening. 2022 Commissions will be gone, as no doubt Old Risky will be and that plus the “option as to how consumers pay” won’t necessarily be a good thing.
So we are having a review where the decision is made prior to the review. Complete and utter muppet.
Pretty simple discussion Stephen.
Very few consumers will pay a fee to have insurance provided to them.
That means very few consumers will have any insurance.
So which is a bigger conflict, creating a situation where people are not insured, or creating a situation where people may be over insured?
Or are we simply setting consumers up to be serviced by salaried sales people inside institutions and industry funds?
No conflict then?
Unfortunately it sounds like this guy has absolutely no idea what he’s talking about. A career politician and union man. I hope he will listen to and follow advice from those at the coalface.