The Financial Planning Association has defended its role in the development of the new Life Insurance Framework, saying it has long advocated for sustainable change in the insurance sector.
In a statement issued last week, the FPA said the Life Insurance Framework (LIF), produced in conjunction with the Association of Financial Advisers and Financial Services Council, was prepared at the request of the Government.
According to the FPA, had the industry not delivered a consolidated reform proposal, the only other choice for the Government would be to respond to the Financial System Inquiry’s recommendation to move to level commissions for risk insurance.
In its statement, the FPA outlined the milestones that led up to the formulation of the LIF, including the development of the FPA’s Life Insurance Blueprint. Among the recommendations put forward by the FPA in the Blueprint were:
- A hybrid commission model, with upfronts capped at four times the ongoing commission payment
- A two year responsibility (clawback) period
- The removal of heavily restricted approved product lists
- A requirement that life companies report ‘churners’ to the regulators
The industry consultation process the Government had called for was challenging
Following the release of the Blueprint, FPA members were surveyed about the recommendations. The FPA said it had received support from 71% of the members who responded to the survey (approximately 1000 members). 67% of members said they believed the proposed remuneration model enabled them to continue providing insurance advice and services, and 55% supported the upfront payment capped at four times the ongoing payment.
‘The industry consultation process the Government had called for was challenging, and caused much debate and discussion,’ the Association’s statement noted. ‘The FPA took on board the feedback gained from members on the Life Insurance Blueprint and fought hard for an appropriate outcome for both financial planners and consumers.’
The statement continued: ‘While the FPA was unable to secure every recommendation put forward in the Blueprint, we continue to fight for sensible interpretation of the outlined policy announced on 25 June 2015, particularly the interpretation of what consists a lapsed policy for the purpose of the clawback provisions.’
FPA – your a joke! – in 3 years time the industry will be addressing an under insurance problem in Australia due to a lack of distribution of risk.
Simple: if your not being paid then who would write the product – the new commission regime chokes the life out of risk writers in Australia.
As a member,what do I get from the FPA?The only reason I remain a member is to maintain my CFP.(by the way,I have only been asked once in 27 years by a client for my accreditation.)The FPA do not satisfy the “best interest ” rule regarding their clients, THEIR MEMBERS.
The FPA did not get involved initially and did not put a submission in until after the horse had bolted.
The FPA and the AFA have a duty to uphold the truth and question assumptions that are not based on presented, documented facts.
For our associations to have quietly allowed questionable statements and scant research to become the foundation of regulatory change, is a disgrace and as a matter of principle, must be investigated.
Both the AFA and FPA state that they had to come up with a consolidated reform proposal or face a strict regulatory response, which is based on WHAT?
Advisers have a duty to fully research and investigate a clients position and make recommendations based on FACTS, not ASSUMPTIONS and half truths.
Yet our bodies representing us have caved in, when all it would have taken was for them to say, we are happy to make changes that will benefit consumers and sustain the Retail Life Industry, BASED ON FACTS.
When the Life Companies and regulators present their cases based on accurate information, we can then move forward in a constructive manner.
We are still waiting to hear what the TRUE CHURN statistics are and how they are calculated.
The reason Australia is a great country, is we have the right to defend ourselves in a fair manner, with a legal system that is not biased and hog tied by the Government of the day.
The AFA and FPA may want to revisit the assumptions laid down before us and come back with demands for real not perceived data.
Then and only then can we have a fairer discourse and a sustainable future.
Well said, too bad they are busier working for themselves and their paymasters to care one iota about IFA/risk writers.
The true “Churn” figures will never be known because there has never been a definition of churn. I can still remember life companies offering “Takeover Terms” ( client needed to be under age 50, initially written at standard rates within the last 5 years ) from memory. They were more than willing to take another life company’s clients without the need for underwriting or justicication of why they were moving. Sounds suspiciously like “Churn” doesn’t it……….. but it wasn’t because the holier than thou life companies were the instigators. 99% of ALL THE PROBLEMS we are currently facing had their origins inside life insurance companies’ “think tanks”. I would dearly love to hit some of those past bright sparks with a clawback ! Not much chance of that though, they would have all collected nice fat bonuses for their inspirational work, and quietly moved on. I hope they all rot in hell.
Jeremy….. Oh so true.
As I’ve stated previously, if the medical profession (drug companies) even tried to put forward a 200 highly focused sample size for a new drug they would be laughed at to put it mildly. The drug simply wouldn’t get the light of day. Further, a first year undergraduate at university studying statistical analysis would question merely the sample size let alone the source of the data. For someone who considers themselves an Actuary is “Actually” (pun intended) a joke and a mere patsy paid a royal ransom for a predetermined outcome based on vested interests and clear intent to take out the IFA. This whole sad saga based on client best interest and churn is a clear smoke screen.
As for the FPA (and the AFA for that matter), they should have come out gun’s blazing regarding the whole basis of the analysis. Alas we all know what they didn’t do.
Unfortunately, I’m forced to be a member of one of these totally inept organisations who clearly did not act in their clients (members) best interests. As for the FPA, their bias to (CBA, NAB, WBC etc) is very well known with scant regard given to the IFA. So the FPA is essentially a Joke as Dean suggests in the initial entry and the AFA is no better. It is truly a sad state of affairs.
On another related point, I could hardly believe my ears when a representative at a work shop of one of the non aligned insurers attempted to defend the ASIC finding by adding that even if you halved the number and halved it again it was still unacceptable…. so there is a problem he stated!…… Well if the data is flawed at the outset the outcome is predetermined (FLAWED). The mere fact that this senior representative is also a mathematician truly amazed me. It was obvious that even this unaligned insurer was pushing their own private agenda.
Well, may I suggest that these insurers are going to regret the stance that has been taken and the lack of support and honest representation of the facts. BDM’s….. start looking for a job.
Just to change the subject a little. We have been paid a commission for life insurance sales, and were paid a commission for financial planning advice. Solicitors get paid a quasi commission or fee for helping socially challenged industry super fund members who fall ill or injured fill out claim forms. Our life commissions were 115% of the annual premium on average, so an average commission may be say $2500. Not an overly princely sum. The average TPD sum insured on an industry super fund member is say $100,000 not to mention what income protection they may have. There is no cap in the fee/commission they charge. I have had clients charged 40%. That is a $40,000 fee, to help a poor sole fill out claim forms. Why don’t we fight back and let the public know what these vultures are doing. They are sucking the life out of our industry more than the tiny percentage of life advisers who churn. However the cynic in me thinks that nothing will happen from a government perspective, because most of our politicians are lawyers, quietly supporting this disgusting practice.
Try and imagine the flood of claims requiring assistance to complete that will pore into the insurance companies when advisers try to charge a fee to help them do it. And the client says thanks but no thanks I will attend to it myself ! Not because they want too but because they have too. The half completed claim forms no ID etc etc etc that will come into the administration areas will be astounding and the backwards and forwards of letters and e mails to now already frustrated clients to gather missing information will seem limitless ! Maybe we could charge to assist the insurers !?? This was just one of the many things advisers did to help streamline the process for all involved and did it for free. !! And please don’t get me started on renewal commissions and there purpose my understanding it was to review the clients needs not become their secretary ! Insurers beware there are plenty of things that are going to come back and bit you !! you know where ?
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