Further confirmation that the Life Insurance Framework (LIF) will progress in its current form has emerged as part of a speech given by the Assistant Treasurer and Minister for Small Business, Kelly O’Dwyer, to the Financial Services Council (FSC).
Speaking at a recent breakfast briefing run by the FSC, O’Dwyer outlined the Government’s agenda for change within the financial services sector covering its response to the Financial System Inquiry, ongoing changes to the governance of superannuation funds and further funding for corporate regulators.
As part of this list of ongoing work O’Dwyer stated “we have also been working with industry to develop measures to improve remuneration practices in the life insurance sector”.
“As part of our financial system program we have adopted the final industry reform proposal which I announced earlier this month to improve the long term sustainability of the sector while at the same time better aligning the interests of advisers, insurers and consumers.”
Interestingly, O’Dwyer said nothing further regarding LIF with the statements echoing those used at the time when announcing the start date for the new model was to be pushed back by six months.
At that time O’Dwyer stated “On 25 June 2015, earlier this year, he (former Assistant Treasurer Josh Frydenberg) announced an industry reform proposal with the Association of Financial Advisers, the Financial Planning Association of Australia and the Financial Services Council. Today we are announcing the adoption of that industry proposal in response to the inquiry and that will commence from July 2016”.
However, two weeks later O’Dwyer announced that claw-back provisions would be reduced from three years to two years leading some industry groups to continue pushing for further changes to LIF.
As part of the FSC speech O’Dwyer also highlighted pending changes to professional, ethical and education standards for financial advisers stating higher standards would place financial advice on a similar footing to other professions and thanked the FSC for its work in this area.
“I appreciate the FSC’s ongoing engagement in this space and I thank the FSC in advance for continuing to progress this reform – this will be vital to ensure that industry continues to work together and with Government to establish an independent standards-setting entity which the Government will recognise in legislation. Legislation will be consulted upon this year.”
I hope this is not the end of this ?? There are way to many questions left unanswered I don’t know where to start ?
Definition of churning ? A freeze on premiums during this period does the commission paid include policy fees and duties etc etc Not to
Mention that most people are still deeply concerned about the 2 years and the effect it has on the value of their business To me there still appears this underlying tone of pushing this through by the FSC the banks and insurance companies before it gets watered down more ? Or am I just jumping at shadows ?
Ken, The life companies now have what they wanted all along – a 2 year opportunity to steal back your hard-earned and relied-upon commission. Your remuneration for a job well done. They will NOT hand back part of their bloated unjustified wages when a client cancels, even though what they received is also commission by another name. It was their only wish all through this to get a 2-year chargeback clause. Well, they’ve out moved and outsmarted the advisers. If you want some real sport just try to get a life exec to admit this! Or that his/her wage is also commission by another name. Nobody in a life company gets paid until an adviser moves a product. They know not what they do in creating this 2 year chargeback and lower commissions. They know not what they do. As usual they are focused on short-term results. Idiocy. Stupidity. Try to keep the faith Ken.
You almost have to hand it to the FSC. They have managed to convince government that less risk advisers (i.e. competition), clients now having to pay fees to access independent risk advice or alternatively buy direct junk insurance and unprecedented premium increases will actually benefit customers! Either this is the best sales job in history or a lot of corruption going on??
Now watch these life company execs get up on stage at out PD days and profess how we are all in this together and that they fought for ‘our’ cause as hard as they could. It is the Aussie Life Company version of a Ponzi scheme. Two-faced, too stupid and too bloated are these companies and the stifling execs who run them. They will be much happier when advisers go completely and their Robo-advisers are doing all their business for them. Won’t that be interesting. Pity the poor consumer with no advice.
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The govt, company execs and a fair amount of company owned dealership heads and execs should hang their heads in shame at their actions to strip advisers of their right to help consumers. this piddling commission and 2 year chargeback will see most lifeys leave. Will the execs leave their comfy offices and go see the clients. Pick yourself up of the floor laughing at that concept and get on with cutting down staff in your office and looking for a buyer for your client base. No time to lose now – life companies have spoken and they want advisers out of the game. Move quickly and salvage the value of your business.
The Gov’t could at least make the provision of Insurance Advice tax deducible, and do away with stamp duty on policies. Stamp duty can certainly make an older persons insurance much more expensive, so that the potential for lapse is even greater, or they may not even take cover at all. Tax deductions would at least help alleviate the view that Advisers charge big $$$ for meetings, plus we may even be able to collect a fee to help cover a reduction in commission or clawbacks. If Insurers and alike were so concerned about Insurance affordability then they would have actively lobbied to take Stamp duty off their policies!
When is the government going to look at the commission structures for General Insurance Brokers… Are they increasing the claw back provisions for general insurance brokers…
These questions highlight that this whole LIF framework has been positioned by the big insurance companies (i.e. banks) for their own agenda’s. Look at the data ASIC used for their report. Absolute disgrace! Smallest sample size ever! Plus not even the life companies can differentiate between a cancellation or a genuine lapse due to their poor reporting capabilities. I don’t know how ASIC could…
Now it seems Life Risk BDM’s are the next cost cutting measure for Life companies. What about the payments to Executives of the insurers… When are the executives going to accept pay cuts…
If every adviser commenced writing level commission structures from day 1 of the new LIF provisions, the insurance companies would have a cashflow problem within 5 years due to paying double for trailing commissions (10% to 20%)
The problem is advisers with less established businesses or small trails will struggle to write hybrid/level only commissions whilst keeping their doors opened. We will see huge M&A activity of small advice businesses being cannibalised by medium to large size advice practices in the next 3 years.
Kelly
Big business says please abolish stamp duty from all life insurance policies asap. Small business agrees and also asks you to ensure clawback is on a pro rata basis.
Also making advice tax deductible to encourage more Australians to seek advice from (soon to be educated) financial planners and advisers would help.
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