The falling rate of life insurance coverage among Australians is “dire”, according to shadow treasurer Angus Taylor.
Adviser Ratings figures from last year found that the situation has devolved to the point that just 480 advisers are writing half of all new business.
Speaking at a dinner hosted by the Association of Independently Owned Financial Professionals (AIOFP) in Melbourne on Wednesday night, Taylor said there are “real issues” around how to get life insurance back into the market.
“The collapse in what’s happened with life insurance, it’s not good for Australians, and at the end of the day, about two-thirds of the money spent by the federal government is insurance,” he said.
“If Australians decide not to insure themselves, guess who has to step in? It’ll be the government. If you want bigger government, get rid of the insurance industry. Well, I don’t believe in bigger government … I want to see a healthy, thriving insurance industry, because we need that desperately for a country that makes government as large as it needs to be, but no larger than it absolutely has to be.”
While Taylor would not commit to rolling regulation back to the pre-Life Insurance Framework conditions, he said there’s “no doubt” that commission levels have contributed heavily to under insurance.
“We have to get that fixed. Now, what that looks like, I think, is the really important question. Have we got the commission framework wrong? I think that’s a good question,” the shadow treasurer said.
“I’m not going to say going back to the old position is necessarily the right answer. What I am going to say is that the position we were in back then meant that the products were getting out there to the people who needed them, and that’s not happening at the moment.
“So, we’ve got to look hard at what’s gone wrong and what the answer needs to be. I have no doubt that the commission restrictions right now are a part of that. I mean, that’s clearly what’s driven the change. How we get back to where we should be is a question we’re open to further discussion, and we want to have those discussions.”
In November 2024, shadow financial services minister Luke Howarth also addressed the possibility of looking at the commission caps.
“Clearly, the 60 per cent upfront commission cap has made it unviable for advisers to sell life insurance to some people,” Howarth said at the time.
“The upfront commission means it isn’t worth doing the work involved. We have a situation where many Australians are now under-insured, can’t give advice on their life insurance, and the only clients worthwhile are wealthier and older, probably in my age bracket.
“The reality is, if you’ve got a young married couple with kids and a big mortgage, life insurance is probably important for them – accidents happen. Younger people, people starting a family, it’s important.”
Questioned on the potential for other methods of improving affordability of life insurance, including increasing the tax deductibility of premiums, Taylor said government should be looking at the “full range of options”.
“What levers can we pull to get insurance back to where it needs to be? We’re talking about life insurance, more generally with insurance, I think we’ve got huge challenges,” he said.
“Insurance premiums are going up at a rapid rate. There’s no question that government has played a role with heavy-handed regulation that might have helped to push those premiums up.”
The shadow treasurer added, however, that any action taken to fix the provision of risk insurance has to be “affordable, it’s got to be accessible, and it’s got to be advisable”.
“If it’s not those things, it’s not good enough,” Taylor said.
“I think [tax deductibility] is one of the levers that we can look at. I don’t think it’s a simple one, because we’ve got to bring the community with us.
“The royal commission, of course, led to that outcome ultimately on commissions. But we’ve actually got to bring people with us and say, ‘Hey, hang on. We’ve got a problem now, and we’ve got to get this industry back on its feet’.”
The Coalition’s position on potentially reviewing insurance commissions, on the face of it, is in conflict with its stated position of implementing the Quality of Advice Review’s (QAR) recommendations in full, given Michelle Levy recommended that commission settings remain unchanged.
However, speaking with ifa on Wednesday, Taylor acknowledged that adopting the QAR is “not the whole answer”.
“It’s an important part of the journey, and we should have been getting on with it as quickly as possible. It’s taken too long,” he told ifa.
“That’s not to say that every recommendation in the QAR is perfect, or that it’s the full answer. There will be other things we’ll need to do, and life insurance is one where I’m acutely conscious of the fact that the industry is in decline, and yet it should be an industry that’s healthy.”
“The reality is, if you’ve got a young married couple with kids and a big mortgage, life insurance is probably important for them – accidents happen. Younger people, people starting a family, it’s important.”
Angus the true reality is that because the LNP stuffed up underwritten insurance taken out via advice from a financial adviser means you guys have blood on your hands because many advisers have left and the majority who remain have lost interest due to multiple reasons some of which you have mentioned.
If you want any experienced risk advisers to return and offer advice again then repeal LIF in full, scrap any need to sit FASEA and make all life risk premiums tax deductible. That is just a start which might just help to stop more blood on you and your LNP hands for the debacle that your party created…
Andrew Bragg was a key player at the FSC when the LIF “negotiations” were in progress.
He not only agreed with the the diabolical Trowbridge Report but repeatedly made threats to the industry that when they didn’t get their ideal outcome of banning Life Insurance commissions altogether, that if the reductions in commissions did not prove to be appropriate to the consumer outcome, then they would again put forward and push for the banning of commission payments entirely,’
So, as the changes that LIF has brought with it has resulted in the consumer now being significantly worse off in regard to professional advice and competitive premiums, how would Andrew Bragg now like to consider a response in relation to fixing the diabolical mess that now exists as a result of the changes he and the FSC loudly and proudly supported previously.
C’mon Andrew, I know you like the sound of your own voice, so what about just admitting you and the FSC got it entirely wrong and now rescind the ridiculous changes.
The Liberal Party made all the changes. Sleep in the bed you made..woof woof
There are so many things that have contributed to the demise of the life insurance industry. Yes the LIF, 2 year responsibility periods (give back 60% of your income nearly 2 years after you have completed the work, yeh that’s fair) and the mind boggling increases in income protection premiums over the last 6 or so years.
Unfortunately back in the 90s and 2000s the insurance company marketing departments started over-ruling the actuaries in the name of writing new business. 20 to 30 years later, they worked out they were in trouble with claims from far too generous policy wordings. Never mind, we’ll just put up level premium insurance by 100% over 3 years, or even 82% in one year. And then they wonder why people cancelled it.
That’s why the industry is stuffed and it is going to take many years, maybe decades, to fix it. We stopped giving insurance advice when all these started happening and won’t be going back to it. Although, maybe an upcoming government might legislate that all Financial Planners HAVE TO give risk advice, to fix the problem. No more far fetched than everything else that has come before it.
LNP via LIF & FARSEA Killed Advice & Advisers, especially Risk Advisers.
LNP via Frydenberg did this.
And now it’s LNP Waffle and Lies about maybe fixing something the LNP totally stuffed up.
As for fixing the HOT Mess, Jonesy and the ALP have proven equally as useless.
Canberra Pollies & Bureaucrats ALL Need to be drained from the SWAMP.
I’m sorry, but if we are relying on Gus to fix our problems, then have an another look at the problem.. Anyone who watches Gus in question time, or sees him on the ABC, where he can be pinned down to a certain extent on the facts, will know that he is about as slippery as a spot of mercury on a plate glass window, carried by four Nubian giants.His footwork and tricky passing really means he should be playing in the Wallabies backline, without any tackling.He will say what he has to say, to keep advisers happy until after the election.Then the detail of the issueswill swamp him.
Anyone who thinks Gus will do anything to improve the viability of life risk in Australia better be prepared to wait at least five years, or the next election after this one
I also saw recent comment from Gus where he seemed to think that former treasurer Frydenberg the did an excellent job for the financial advice industry. He seemed to be saying there had been many improvements at Josh’s direction. Josh was the same chap who told someone from the AFA that he was in the business of outdoing Bill Shorten because he didn’t want Bill Shorten to be able to change anything should he be elected to government in 2019 which might just favour the industry funds
So he wants our vote without committing to anything. No wonder the crossbench keeps growing.
They will expand the un-‘qualifed’ advisers to insurance companies, which was frydenberg’s plan all along via his plant – Levy . That’s all they will do. They don’t give a stuff about us.
Someone needs to remind Senator Bragg about the brilliance of LIF.
Could someone confirm the following:
1. Is there an election coming up?
2. Wasn’t it the Coalition which promoted & implemented LIF, which was primarily responsible for the demise of the industry & worsening underinsurance.
3. The likelihood of the coalition, if elected, taking quick action to remedy the situation is zero.
Repeal LIF
So, they know what the problem is and acknowledge that……but they aren’t going to fix it. Whilst at the same time stating that something has to be done to fix it, but we can rule out the solution as the option.
Yes, minister.
I asked ChatGPT to summarise this:
Angus Taylor, the shadow treasurer, noted the decline in life insurance coverage in Australia and emphasized that reforms should focus on making insurance affordable, accessible, and advisable. He suggested that commission restrictions may be contributing to under-insurance but did not commit to reversing the regulations.
I think chat GPT it’s being generous given: “he said there’s “no doubt” that commission levels have contributed heavily to under insurance.”
Glad to see the penny is finally dropping regarding previous reforms not having the desired outcome. The majority of Australians’ insurance cover is limited to default cover within their super fund (if they’re lucky), and many haven’t looked at what they’re actually covered for until they need to make a claim.
The cancellation of cover for accounts deemed to be ‘inactive’ for 16 months only adds to the underinsurance problem in Australia. How many people have unknowingly lost coverage they believed they had in a previous fund due to changing employers or failing to update their contact details? This is a statistic we’ll unlikely ever hear about.
Australia should have taken note of the consequences of reducing renumeration incentives from the UK – who have since reverted to higher commissions to incentivise insurance advice. Unfortunately, our decision makers seem to be lacking in forward-thinking and practical experience when introducing such kneejerk reforms.
Our decision-makers already knew this. It’s just that they have contempt for us, advisers.
umm… which government was it that implemented the LIF?
and now they’re telling us that that was the wrong decision, and that we should vote them back in to fix their mistakes?
id like to believe they will raise commission rates but we have heard this all before and absolutely nothing happens when they get elected. look at 4 years under Labor still no short form SOA
You lot pandered to the Life Insurers and handed them our livelihoods (thanks, Josh). Now, it’s too late… we’ve bolted.