The revised Life Insurance Framework reform Bill was introduced into the House of Representatives shortly before 10.00am today.
Following the Government’s inability to pass this legislation prior to the 2016 Federal election, the updated Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 includes changes to the original draft legislation following recent consultation by the Government with industry stakeholders including the AFA.
In releasing a statement supporting the introduction of the LIF legislation, the AFA notes it contributed to an agreement in principle with the Minister for Revenue and Financial Services, Kelly O’Dwyer on a package of life insurance reforms in November 2015, but has worked diligently since then to achieve a level playing field across all channels of the life insurance market through the detailed drafting and consultation period.
This Bill does not give our members everything that we thought was appropriate…
AFA CEO, Brad Fox, said “This Bill does not give our members everything that we thought was appropriate, but there are many other stakeholders that the Government also needs to satisfy.” Fox continued, “On balance this Bill, as part of the package of reforms that includes the Life Insurance Code of Practice, an ASIC led Statement of Advice review project and regular reporting from insurers to ASIC on lapse rates, means that consumers can have more trust and confidence in life insurance. That is the most important outcome.”
Fox emphasised in the statement that not having a level playing field [for advisers] was always a deal breaker for the association and the Minister has supported that position. “This Bill will mean that life insurance arranged through personal financial advice from a qualified financial adviser, and life insurance bought directly through the weaker general advice channels such as the internet, credit card offers and TV sales, will have the same remuneration and clawback provisions applied to them. Very importantly, we have succeeded in ensuring that business models where no advice at all is provided will also fall under the regime.”
Premium Freeze and ASIC Review
The AFA has also stated it is working with insurers towards a premium freeze for clients for the duration of the clawback period ‘…to avoid circumstances where significant premium increases on the first anniversary of a policy make it compelling to consider alternative insurers for clients.’
In a statement released by Minister O’Dwyer announcing the introduction of the Bill, the Minister confirmed the ASIC review of the impact of the reforms during the transition period commencing on 1 January 2018 will now be undertaken in 2021, which reflects the call made by the AFA and others to delay the review until the impact of the implemented reforms had been given sufficient time to take effect.
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“the Minister confirmed the ASIC review of the impact of the reforms during the transition period commencing on 1 January 2018 will now be undertaken in 2021”
Question is why did they not give FOFA reforms time to take effect and then conduct a review before making LIF Reforms? FOFA through best interests already makes churn etc illegal.
So what are the criteria they are looking for in 2021 to review the impact of the reforms? This has still not been clarified, and you would think it would be an important question.
Also, shouldn’t the most important “stakeholders” in this debate be consumers? Still asking where the consumer benefit is in LIF, and still not getting any answers.
Absolutely correct Melinda. Advisers have been asking that question for I don’t know how long – where is the consumer benefit in the LIF? And yet, no one will answer that one simple question!
They will not, as there are no benefits to the consumers, LIF only benefits the Insurers and their owners the Banks!
Kelly O’Dwyer has little understanding of what she has introduced.
Brad Fox states this bill does not give our members everything we thought was
appropriate, but there are many other stakeholders the Government needs to satisfy.
I would have assumed that the consumer who pays the premium, (All Australians) should have been the main focus, though it is obvious that the consumer was trampled
underfoot by the hordes of idealists and demagogues where self-interest and stupidity rules supreme.
As to the regular reporting from Insurers to ASIC on lapse rates, can we get an answer as to “what” format is the reporting to take?
How is the reporting to be collated?
What questions will be asked when a policy lapses to determine “why” it lapsed.
A report is nothing more than words on paper with little meaning if those words are not
backed up with concise, accurate data that actually finds out exactly what policies lapsed, how they lapsed and why.
All the responsibility will still fall on advisers with NO responsibility or accountability being held by, or taken by the Institutions or entities that caused the lapses.
As to ethical, professional advisers who provide full advice and nil advice product
floggers receiving the same commission, does that not sound alarm bells?
How will it actually work when a product flogger who does no Fact Find, no research, no
pre assessments, no SOA and nil Best Interest Duties, which means they can spend minutes flogging policies over the phone, compared to many hours, days, weeks for advisers who provide comprehensive advice to finalise their clients Best Interest work, yet both Business entities will be paid the same.
It will very quickly become a race to the bottom of “bad advice” Businesses attaining
massive profit, verses massive losses for quality advice practices.
It will end up like the ongoing education debacle where diplomas have cost the
Australian Government Tens of Billions of dollars for nothing but words on paper with little to show for it, except this will be much worse, as once a person becomes uninsurable and all they have is a worthless policy, the financial responsibility falls on the Government for the rest of that persons life.
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