The Cooper Review has recommended all commissions should be banned on risk products in superannuation.
The proposed banning of risk commissions in super is one of sixteen recommendations made in the Insurance in Superannuation section of the Super System Review Final Report, released on Monday this week.
The rationale developed by the Cooper Review Panel in recommending that risk commissions be banned in super is strongly influenced by the Panel’s broader agenda to maximise the value of a member’s superannuation accumulation during their working life. This agenda is reflected in the main reccommendations stemming from the Cooper Review, which focus on greater efficiencies and cost savings that will be brought about by the introduction of the MySuper product and SuperStream back office administration concepts.
The Panel argues that the cost to the member of commissions on risk products makes up a meaningful proportion of the overall cost of the members’ insurance premium. This is part of a broader concern about insurance premiums eating into superannuation account growth, as stated in the Final Report:
‘Currently, trustees must seek to strike the right balance in offering insurance to protect against the risks of being unable to contribute to an adequate standard of living and the impact of premiums paid on ultimate retirement benefits.’
… it is clear that commissions represent a major expense for life insurers, and by implication for superannuation fund members
Citing research data, the report compares the relative costs to insurers of commissions and claims paid. The Panel says that while these figures relate to products both within and outside the superannuation system, ‘… it is clear that commissions represent a major expense for life insurers, and by implication for superannuation fund members.
The Panel says it received a number of submissions that supported banning risk super commissions, and that it agrees with these views
… allowing commission‐based payments for insurance would mean that financial planners could still be conflicted in giving their superannuation advice
It adds that it believes ‘… insurance commissions should be prohibited in respect of all superannuation products regardless of whether the insurance cover is a default cover or not,’ adding it was also concerned that allowing commission‐based payments for insurance would mean that financial planners could still be conflicted in giving their superannuation advice.’
But while the Cooper Review Panel cites the issue of conflict of interest, its main motivation in calling for risk commissions to be banned in super is almost entirely about maximising superannuation accumulation levels for an ageing working population.
The exact recommendation wording (Recommendation 5.12) made by the Panel is:
Up‐front and trailing commissions and similar payments should be prohibited in respect of any insurance offered to any superannuation entity, including to SMSFs, regardless of rules on commissions that might apply outside superannuation.
Click here to access the Super System Review Final Report Chapter 5 – Insurance in Superannuation.
riskinfo has released a summary article of all sixteen insurance recommendations made by the Cooper Review: Cooper Review – The Other Insurance Recommendations.
No problem – not working for nothing – so clients will either be uninsured or paying for it outside super.
That will help the under insurance problem we have in this country!
What incentive will there be for risk writers moving forward? The only people that wont be underinsured are those who will be paying for cover out of their back pocket. Go away Cooper you oxygen theif.
A government gone mad to support industry funds, a review that hasn’t bothered to examine the industry fully and an association – The FPA that represents nop one – combine them together and what have we got? A mish mash of business sabotage who can’t manage anything successfully.
When will sanity prevail? What we are seeing is interference in how we earn a living. Perhaps the ATO should also be attacked on the tax laws on insurance in superannuation.
No wonder financial planners are leaving the industry, and of course this will add to the underinsurance of a nation.
The only winners here are the Insurance Companies who provide cover to the super funds. They will not be reducing the premium to allow more to go into the investment. What a joke
Banning all commission linked to super will propably mean a new generation of underinsured Australians. Some people want a stand alone insurance policy inside super (with no investment) because they prefer that insurer’s death benefit options with combinations of lump sums and pensions.
Its all well and good for the Cooper report to maximise superannuations accounts by abolishing insurance commissions, I wonder what would be the more significant impact if all of a sudden clients need to access their superannuation under the hardship provisions because they could not afford insurance outside of super. Sound recommendations Cooper…
I think the government have tried the my super philosophy before, but they called it the aged pension.
They failed at that, now they want to collect the money again (but not as an extra tax hike, but a default super), no doubt will be untaxed, & disguise it as something called super.
To me it is just another tax collection, but called My Super.
These funds into My Super will in all probability be used to reduce deficit & fund the broadband system or something like that,in my opinion.
What absolute crap.
The only effect banning commissions will have is to push up premiums and take us back to the days where the average punter won’t know what cover they have as this will be decided and implemented by the super funds as a default option. The result of this method is either under or overinsurance and is contrary to the rules and regulations that ASIC has been trying to enforce. Advice for individuals will be pushed back 20 years. In fact the question is who will give these people advice on cover when no-one gets paid for doing the job. The answer is nobody.
If less people are getting advice and therefore less people are getting insured it simply means that there is less money in the bucket to pay claims. Therefore cost won’t come down, it will go up.
Who will benefit you ask. The ‘banks’ and ‘industry funds’ will as they will have their hidden fees built into the superannuation product. We all know when corporations get involved its all about their profits, and their shareholders not the individual.
“”… it is clear that commissions represent a major expense for life insurers, and by implication for superannuation fund members””
Whoever wrote this statement is a complete idiot for without commissions no-one sells, without sales less are insured, if less are insured less funds available to pay claims, less for claims, increased premiums.
Any fool understands this…. Oh sorry except for the fools that put together the Cooper Review.
Who are these Morons
What background are the people researching these findings Cooper included. All miss the point, the average Australian is catered for on the advice front under current arrangements. The proposals will mean less planners, more expensive advice, no-one taking up advice, under-insurance thus greater costs to the community. Has any one of these so-called experts ever guided people through their needs and established protection and the amount needed to be saved for retirement? I think not! If this “——— party” remains Australians will be the least informed, financially kept in the dark people in the Western world. Only thing is it won’t be the “Western” world anymore. When you stuff an economy up don’t destroy industries in a bid to make up the shortfall.
Only a few months ago, Ken Henry was being paraded around by the labour party as the economic messiah, whose ideas were beyond reproach. His ideas are now ridiculed and he has been shown to simply be a mouthpiece for the Government. Cooper’s ideas, other than the one proposing Industry fund boards be more accountable – are by far the most regressive I have ever seen! What is his experience and who feeds him the one sided mis-inforamtion he bases his ideas on. How much have these three useless reviews cost the taxpayer? The agenda here is to destroy the advice network as it is today and our supposed industry bodies just go along for the ride. It would also be good to find a journalist or two who are actually intetrested in learning the truth instead of just sensationalising the spin that excretes out of Canberra. Come on, there must one out there willing to learn the truth!
The default level of cover,for most, within super is usually inadequate and just a starting point.It is then the professional adviser who recommends ,after doing an analysis of the situation,an appropriate top up or other forms of cover.This gives that person and his/her family the cover/protection they need.If the individual can not afford to pay outside super how does he/she get the cover/protection required?Cooper needs to stop looking at how much c’ssn is paid and look at the level of protection supplied to very vunerable families.
Well said Walter (no 8)and once the “My Super” is up and running with all these funds running through government coffers, the government will readily accept the funds as being “their money” and be happy that they’ve done it for the “good of the Australian people” What a load of clap, apart from it being further evidence of daylight robbery.
Cooper clearly did not read or understand the purpose of super, which is to provide benefits for retirement, death and invalidity. Coopers review has narrowly focussed on retirement benefits only and ignorantly thinks low cost equals greater benefit. Death & TPD insurance is specifically allowed in super to provide for the other parts of the sole purpose test. If advisers are not to be remunerated for providing advice, either through commission or any other payment (MySuper will not allow for any forms of remuneration to be paid to advisers, much like industry funds) how does he propose people will be adequately covered in the event of death or disability? Does he think people will buy more simply because it might cost less? Will industry funds be banned from accepting group life commission as I’m sure they do but do not currently disclose? Like other reviews performed by public servants of late that have little practical reality, this review has missed an opportunity to actually do something good and instead will mean people are even more disengaged from super and insurance levels will be even more inadequate than they are already. The Cooper Review proves again what a bunch of muppets we have reviewing and running this country.
So the strategy of salary sacrifice and additional contributions to cover the insurance premiums in super is wasted quality advice. The adviser gets paid via commissions and not out of the hip pocket of the client. The super fund grows irrespective of the premiums. The commissions is not the problem. Who is advicing this man Cooper. At the end of the day you pay for what you get. 10c advice can’t even buy a lollypop and Cooper wants people to have ease of access to quality advice!!! From whom the tooth fairy???????
I have never had a client or a widow complain about commissions or premiums at claim time.
Lets just get on with our jobs and ignore the so called experts!!
Interesting comment re Labour=communists. Correct me if am wrong but was it not the Workers Unions who introduced the insurance premiums into the work superfunds. They intiated the work super funds and who was the biggest recipients of commissions from all these funds? Was there quality advice given back then. No!!! If Cooper has a problem with super funds not being efficient and effective start with qaulity advice first and not the payment of that advice. A super fund sitting on a rock will go no where whether there is insurance premiums or not. People who are recieving advice should be able to have a choice in what they want and how they pay for it. Maybe Cooper wants us to have insurace outside super and the client have no tax deductibility or not insurance at all. Nice one Coop.
Here we go again with the truly underinformed proposing legislative reform to the detriment of so many. Mr Cooper should leave his perfectly composed kingdom,bereft of commercial reality, and meet with a couple of my “clients” who have had the misfortune to suffer the consequences of believing in the stupidity of the reforms you propose. They are beneficiaries of the best support I could muster from their “no advise” disinterest in insurance in their super. That was of course until they suffered the life changing life risk event that I hope you never have to face with anyone you actually love!!
Your proposaLS ARE TOO COLD HEARTED FOR ME,let alone personal agenda driven.They will be resisted.
Well folks, we voted ’em in! (and before we all say…”not me!!”, remember that’s the way democracy works :-)) And we can vote ’em right back out again.
That’s right, the protection products that members of superfunds need will just jump out of the box and sell themselves. I suppose if your paid a salary to sell/advise on insurance from a call center (intra fund advice) the advice will be better and the cost lower. Pigs might fly!!! Underinsurance is at critical levels in Australia and this will now increase by the incredible myopia of another government committee.
Just out of left field, can a government tell an insurer whether or not and how much they can pay an intermediary. This sort of prying is actually anti-competitive allowing industry funds to collect insurance fees (commissions?) and denying advisor remuneration. I say it is unconstitutional to set pricing in any industry. This type of totalitarianism should be fought tooth and nail legally and by the vote.
I agree with all the comments above, the anger is justified and understandable.
Australia is supposed to be a free country yet we now find ourselves being ruled by a government that resembles a socialist dictatorship. Their policy decisions are driven by jealousy and hatred of free enterprise rather than logic and economic responsibility.
The socialists are masters of spin and propaganda. They present themselves as holier than thou to the unaware public by telling them that policy decisions are in the best interest of the average person when in fact the policy decisions are made in the self serving interest of the socialists themselves.
The unfortunate truth is, if Labour wins the next election (with the Greens holding the balance of power in the senate) they will ban commissions on all financial products including insurance products. This will not only destroy financial advisers it will also cause massive problems for related industries such as research houses, education providers etc. It will also reduce the funds accumulated in the statutory pools of insurance companies. Insurance companies invest this money into our economy which helps to drive growth. So the impact of these socialist policies is likely to be far greater than most people will realise initially.
You all may think that government introducing draconian laws that force people to pay for a service in a certain way is unconstitutional which in my opinion it should be. However it doesn’t appear that anyone will be fighting for the financial adviser because it is quite clear that the big end of town also sees an advantage in crushing all of us.
Let’s hope that in the coming election voters make their decisions based on the results of this Labour governments policies rather than the spin that they propagate.
Never before in Australia’s history has our freedom and liberty depended so much on the outcome of an election. Not to mention the survival of the financial planning industry.
Aside from underinsurance, the next problem that this drop kick Cooper faces will be misrepresentation (or lack thereof). Who does he propose will be in the client’s corner assisting them when it comes to lodging a claim? It wont be me if I am not getting paid! Maybe Cooper can offer to represent claimants free of charge??
Cooper is a dangerous left wing activist.He is the same fellow who addressed a past conference and stated that taking out insurance was a waste of money.Remember that?He was with ASIC then.It was in this mould that he was appointed by the lunatics in the Labour party,no doubt knowing the outcome of his Brief.I agree with “Tony” in his last Churchillian paragraph.
If I receive a commission on risk within Super then I always handle claims as part of the service. Death and TPD claims can be very time consuming. If commissions are banned who will handle the claims and if a fee is charged for the service is there not a likelihood that this will be charged back to the insured member on a user pays basis?
Cooper is a extremist, his views are far left and recommendations echo his vision for a socialist utopia in Australia. Not only is he out of touch with mainstream Australian values, but is hell bent on destroying the financial advice industry as we know it. This is entirely predictable, he was appointed by a Labor Government, whose cabinet is comprised of 70% ex-trade union officals, politely described as far left zealots who openly despise free enterprise and the small business sector of the economy. The Financial Planning Industry has been in the gun sights of these socialists for many years, aided and abetted by immoral left wing journalists and ambivalence from industry associations and licencees alike.
The Industry Super Funds, sorry,the Government is looking at this issue in a 1 dimensional picture.
The focus is on Commission at all cost,ignoring the implications of 1 dimensional thinking.
If their intent is to proceed at all cost,then at least only the 9% component of Super should be commission free,Self employed and employed people who wish to Salary sacrifice and take better quality,higher levels of Insurance, still require advise and unless the Governments intent is to bankrupt every Insurance Adviser and kill off competition, (which will suit the Industry Super funds just fine and build their own monopolistic power base)then a serious rethink,discussing the full picture involving more than a minority,eg;all australians> self employed and employee’s who want advise, is mandatory.
If there are no advisers left to advise and guide people on the good and bad points of insurance contracts,which includes implications of inferior policies,release restrictions,Taxation on benefits,etc etc,we are left with employed staff of Industry funds with very little knowledge and less experiance,let alone representing clients at claim time,which will not happen.
I’m with Sue Laing, vote the idiots out and regain some sanity
It appears to me that the Cooper review is just pushing the goverment’s paternalistic line. And I am not sure how thorough their research has been.
As an adviser I have previously picked up a group life risk client which had been dealing directly with an insurer for a number of years. The client wasn’t fully aware of the terms and conditions of the policy and how it applied to their employees. Their existing policy had no commission in it. I managed to secure them cover with another insurer at a lower premium with far better terms and conditions, and I might add the new policy included commission.
I am happy to work for fee for service or commission. But I think the choice should be left up to the client to decide how they wish to pay for the advice they receive. It should not be dictated by the government.
May I suggest that we all be proactive for the up coming federal election and join an opposition party and help to vote this governement out of office.
It’s probably been said before but no commissions doesn’t equal lower premiums. It equals an opportunity for the life companies to make more money and why wouldn’t they!
Keep in mind though that in one of the preliminary reports, the government did say they would probably ignore commission recommendations in favour of the FOFA reforms.
In the end, the government is eroding any real kind of choice for people who do actually want to get advice and understand they have to pay for it. I’m all for doing away with trails in favour of ASF’s and so on.
If risk comms are banned, all it will take is for an enterprising life company to offer to pay the client’s advice fee on completion of the policy. Trails might disappear.
In the end, all you can do is just engage in business as usual and try to get your business ready for the changes once they are 100% set in stone.
I love the way that these reports always quote ” Research Data”. I have been in this industry for 20 years and have never been contacted about reaserch…. Did Mr.Cooper actually take any counsel from highly qulaified risk insurance specialists about the critical work they do every day for working Australians? By reading this recommendation the answer is a resounding NO!! Jeremy you have nothing of substance in this report that offers any alternatives to advisers about how important the work is that we do to help families in their hours of need.
Comments are closed.