Life insurers will not introduce mandatory changes to commissions from 1 July after the Life Insurance Framework (LIF) legislation failed to pass through Parliament before the calling of the Federal Election.
A number of life insurers contacted by riskinfo stated they were disappointed the LIF legislation had not been passed but would continue to work towards other changes within the sector.
However, they were unlikely to move to the lower upfront commission model which was due to start from 1 July and would instead continue with current commission models.
ANZ stated it was disappointed that LIF had not passed “…as a lot of good work was been done by the industry to move to a new model”.
“..it is unfortunate that the timing of the federal election has prevented the LIF Bill from passing…”
“While we won’t be making changes to commission arrangements until LIF becomes law, the industry can continue with other measures such as the code of conduct to ensure we have strong consumer protections in place,” ANZ stated via a spokesperson.
Asteron Life adopted a similar approach stating “it is unfortunate that the timing of the federal election has prevented the Life Insurance Framework (LIF) Bill from passing ahead of the planned 1 July implementation date”.
“We’ll continue to monitor any political developments and will review our commission structures as appropriate. We’ll communicate directly with our advisers should we propose any changes,” the insurer stated via its spokesperson, pointing to a number of commission options it introduced in January of this year in preparation for LIF.
“There are still elements of LIF that are not dependent on legislation, such as the Code of Practice. Insurers will continue to progress its development and at this stage we are still aiming to implement from 1 July with a 12-month transition period.
“There are still elements of LIF that are not dependent on legislation, such as the Code of Practice.”
When contacted AMP stated it “will align with broader reform and timetable” and that it recognised the need for the life insurance industry to change to restore customer confidence.
AIA Australia stated that it expected the LIF legislation would continue in some form, regardless of which party won the election, and was “already working with advisers to help them navigate these reforms, and we’ll be monitoring developments on a legislative level before we announce any official changes.”
MLC stated it was aware of the circumstances surrounding LIF but would not formally comment on remuneration changes until after the Federal election.
Riskinfo understands that BT Financial Group, CommInsure, ClearView and Zurich will also continue to offer all current commission options to advisers until such time that the arrangements contravene any legislation.
As reported by riskinfo last week, the LIF legislation needed to pass through the Senate by 5 May to avoid becoming permanently lapsed in the current Parliament but failed to do so.
While LIF can be reintroduced into Federal Parliament after the election this would depend on the Government being returned and the Opposition being amenable to the legislation as it currently stands.
Under Parliamentary procedure the Government would also have to reintroduce the LIF legislation into the House of Representatives as it would be considered a new piece of legislation to be considered by the Parliament formed as a result of the 2 July election.
The powers that be NOW need to be persuaded that the problem of inappropriate replacement of insurance policies by financial advisers (which without question is a significant problem) is best handled through a more stringent compliance regime where the accountability and responsibility for transparency is shared between the Planner, their firm and their Licensee.
Whenever a clients insurance policy/ies are to be replaced, their should be a clear compliant process that needs to be followed strictly by the planner , a process which is much more rigorous and transparent than it currently is. Every such case should be compliantly approved by the Adviser’s licensee and measured against a clear set of compliance criteria which would measure and determine whether in fact the advice being provided to the client is in THEIR best interests. If this requires that Licensee’s have to recruit more compliance people to deal with this burden then the cost of this would no doubt be borne by the planners in each Licensee group. This would be a better outcome for the client, a better outcome for the Planner and the Insurer’s and would be more likely to improve the quality of advice being provided and more likely to deal with Australia’s chronic under insurance problem.
What say any one? Am I talking nonsense or does anyone agree ?
G McROBERTS
Some of us do this already !
Agree entirely.
Gordon, where there is inappropriate replacement of Insurance policies within a practise, then a more stringent compliance regime should be mandatory.
However, the real damage is being caused by Direct Product Floggers, who do not do any of the Best Interest Duties we perform and now there are hundreds of these entities promoting “cheaper”, “seconds to complete”, over the phone inferior products with no Fact Finding, no comparing their products to existing superior covers people already own, no SOA to explain why cover is needed, what cover to take and what Company will provide the best policy and needs outcome.
Gordon, what you are saying is correct, though the current regulations stack the deck considerably against retail Life Advisers.
Where we spend 10 to 40 hours over a period of weeks and months to get the best result and appropriate advice to match a client’s needs, the direct entities spend 10 minutes flogging policies that meet NIL of the clients needs and to really throw it in our faces, these Direct Product Floggers get the same commission as us, for NIL responsibility to anyone but themselves.
For the Life Insurance Industry to grow in a sustainable way, there must be clear, concise regulations that all entities that sell Life products, must abide by.
The Life Insurance Framework has a long way to go to achieve this.
I get calls from a direct Insurer (unsolicited of course). I play along with them to see what they say… They were trying to persuade me to cancel my life insurance under super (which also had linked trauma & tpd) for their more expensive life policy because…… the policy expiry date was 100, instead of my life cover under super which expired at 65 (obviously with a continuation option, outside of super I can do the same thing).
I think that just creates more compliance for the vast majority who already do the right thing. Until there is a level playing field between what ‘advisers’ have to do and what the I-Selects and direct insurers have to do, then what is the point? If one side of the ship is completely watertight but the other side is full of holes, the ship will still go down. If this is really all about protecting the consumer (and not insurance companies, the ISA and/or vested interest groups), then the rules of how a product is bought and sold must be consistent. It’s like having a medical system where you can’t buy certain drugs without a prescription, while allowing them to be bought on-line without a prescription at the same time!
Given much of the push towards these changes came through the FSC, surprised to see some of it’s member life offices not now having the courage to implement the changes, whether they be right or wrong. Sends a very mixed message to Advisers, Government and the public I believe.
If all these so called misdemeanors were even remotely true like “churning”, in appropriate advice “, or commission driven advice on a wide scale, why doesn’t one of these FSC members be the first to move by lowering their commissions on new business @ 1 July 2016.
I think the answer is simple, the basis for change has very little merit but if there’s one life company who believes otherwise, show the courage of your convictions, be honest with the advisers who’ve supported you in the past, reduce your premiums to the same level you want the advisers to reduce their commissions by if this is what you perceive is in the public interest.
Then watch your outflows increase as your inflows dwindle.to a trickle.
Sounds like a plan to me.
Kelly O’Dwyer, where are you,…… why do you think this won’t happen until you pass your small business destroying legislation ?
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