PJC Review Will Not Tackle LIF Reforms

19

The Parliamentary Joint Committee examining the life insurance sector has stated that the passage and content of the Life Insurance Framework (LIF) are matters for the past and it was focused on the future of the life insurance sector.

Nationals Senator for NSW, John Williams
Nationals Senator for NSW, John Williams

Following three days of public hearings from advisers, associations, consumer groups, legal firms and insurers the PJC Inquiry has focused primarily on issues related to underwriting in the group and direct space, mental health claims and the medical assessment and claims processes of life insurers.

Where the LIF process and legislation has been raised, including in a number of discussions around adviser remuneration and clawback, the PJC has not sought any opinion on whether the legislation should have been introduced or the validity of ASIC Report 413 and the Trowbridge Report which preceded it.

An examination of the hearings conducted by RiskInfo found that in the nearly 20 hours of hearings conducted across three days, LIF occupied less than two hours of its time and what was raised was presented by individual advisers and advisory bodies and associations, such as the AIOFP, LICG, AFA and FPA.

However, despite these efforts PJC members did not engage in the topic or reminded witnesses that the Committee would not be reviewing LIF itself.

This was evidenced in statements from NSW Nationals Senator John Williams following an exchange with Spectrum Wealth Advisers, Chief Executive Mark Schroeder who was representing the LICG on the second day of hearings on 24 February.

“…it is a case of ‘shut the gate, the horse has bolted’ on the LIF issue…”

Schroeder informed the PJC that much of the concern around conflicted remuneration and churn that led to the development of LIF resulted from vertically integrated models pushing advisers to sell in-house products from limited approved product lists.

“My concern is that most of the headline issues that created the LIF addressed issues that are systematic in the conflicted remuneration side…A lot of the people who are doing the right thing by the client are being affected by LIF to the point of being not viable. The issue is that banks and insurance companies who are conflicted are causing most of the problems, but their competition, which are the people who actually talk to clients every day, are being made unviable because of the changes,” Schroeder said.

To this Williams responded, saying, “I am sure you make a very valid point, but it is a case of ‘shut the gate, the horse has bolted’ on the LIF issue. The reason being that some on the other side of politics have done away with commissions totally. Who knows if that is something to be talked about.”

Williams, who was the only member of the 10-member committee to address LIF, repeated his view that the framework was not on the PJC’s agenda after Schroeder questioned why it was introduced if it made no long-term change to adviser remuneration nor created greater consumer benefits.

“We had the consultation [on] LIF that went through months ago. Now we are looking at the insurance industry going ahead. Perhaps we should concentrate on that?,” Williams stated in response.



19 COMMENTS

  1. Good god almighty. So lets understand this….Hear is the PJC in their infinity display of stupidity..

    “the PJC has not sought any opinion on whether the legislation should have been introduced or the validity of ASIC Report 413 and the Trowbridge Report which preceded it” AND that .To this Williams responded, saying, “I am sure you make a very valid point, but it is a case of ‘shut the gate, the horse has bolted’ on the LIF issue. The reason being that some on the other side of politics have done away with commissions totally. Who knows if that is something to be talked about.” – A valid point but we are not going to listen anyway despite the VALIDITY of your point!!!!!

    So a plan that has no benefit to the consumer, a system infused with conflicts via the vertical integration model created by those in charge and of course championed by the FSC, a system that will cause a lot of harm to advisers, their employees in their practices, this according to Williams, we should just simply put up and shut up as the opposition will only be worse is the answer to us as IFA’s, the ones that are doing the right thing….give me a break.

    Lets get this right, from the incompetent management of Centrelink and the fiddles to policy now hurting our clients in terms of pension benefits to the disaster of negative gearing and housing affordability, to the 13.3% of the Australian population who according to the Australian Council on Social Services (ACOSS) are living at or below the level of poverty (October 2016 report), to the economy itself which is facing a possible recession according to 3 ratings agencies, though it escaped this by a whisker in the December quarter GDP figures due to a rise on commodity prices , we should simply accept more incompetence from politicians like this on our industry?. These fools don’t know how to run an economy, and they want to pontificate over our industry?….what an absolute farce.
    John WIlliams, you have no idea as to what you are taking about, driven by agenda or political ideology, fools like this on both sides ought not be trusted. Tell me Mr Williams do you act in the best interest of those you purport to represent….you know….the voter?. Are you conflicted in remuneration, pandering to say the FSC and treated well by the members of same. You achieve nothing for the Australian consumer and now, like ALL industries where government has interfered, you will allow an industryto become another wasteland…..much like all industry that has shut down, off shored, or made expensive due to an overwhelming level of of ill thought, incompetent level of regulation that has now impacted productivity….oh yes that word, you know the one that caused the RBA in its recent notes to reflect on the fact that wages growth is at its lowest in 2 decades.
    No, fools like Williams, Chris Bowen from Labor, ODwyer and the entire gaggle of politicians are not interested in the best interest of the nation and its people, be they individuals or business. They are driven purely by ideology and that other one that they say is wrong for us but okay for them…self interest. As I said, what a farce.
    Maybe its time Australia had a Brexit moment and threw the political swill like this out of office….without the gold card and inflated salaries and pensions paid for incompetence.

  2. Yes Senator Williams, the horse has bolted because the gutless left side of politics on both sides, and in particular the Liberal Party led by a spineless leader wouldn’t and didn’t listen to their constituents. The destruction of many small businesses because of the LIF legislation shows how little interest any of these people have beyond the next election.

    OK, so lets follow the Labour Party philosophy, borrow as much as you can so you can give it away to anyone other than your own people, tax the eye balls out of the people who contribute the most to Australia’s prosperity and dole it out to those who don’t lift a finger,.. and contribute nothing !
    Senator Williams, you and the other members of the PJC will come to regret your pathetic capitulation to this issue and you should be condemned for your show apathy.

  3. As noted above and elsewhere, there has been a large focus on the issue of mental health claims in the PJC Inquiry. This focus has almost exclusively been on insurers not paying enough mental health claims.

    When are we going to address the elephant in the room that increased mental health claims are making income protection increasingly unaffordable? It’s all very well for Jeff Kennett and others to lobby for insurers to pay more mental health claims, and everyone in the public eye has rushed to agree with them due to the political correctness backlash they will suffer if they don’t. But who pays for these claims? It’s not the “evil insurers”, it’s not the “bottomless pit of government money”, it’s the other income protection policy holders whose premiums have risen and continue to rise to cover all the extra claims.

    Dodgy direct products like those from TAL and Suncorp have addressed this issue by incorporating mandatory mental health exclusions into their policies. But why don’t insurers provide an optional mental health exclusion at a lower premium in their underwritten products? Or even better, make mental health cover an optional extra?

        • Can’t give you a quick heads-up right now. However there are one or two which offer mental health exclusions in TPD and IP for a reduced premium. I personally wouldn’t offer it because at claim time it might get ugly.

          • If anyone knows of specific IP product examples where mental health cover and the associated extra cost is optional, I would be keen to hear it. I’ve heard lots of people say “there are some companies that offer it” but no-one has been able to tell me a specific current example.

            I take the point that it would be inappropriate to provide without the client understanding the implications (as direct insurers do), but if clients are making an informed choice it’s no different to the myriad of other extras and add ons that clients decide against when purchasing insurance. Very few clients are willing to pay the considerable cost of every type of insurance, with every optional extra included.

            At the moment the only option available to people who don’t want to fund Jeff Kennett’s social crusade through their insurance premiums is to choose a dodgy direct product, with all the extra risks that entails.

          • Your is a valid point, Paul. I know I’ve seen the reduced-premium mental health exclusion in one or more PDSs, but simply don’t have the time to chase it down at present – sorry.

          • Hi Paul, I haven’t looked at this for a little while but I strongly believe TAL Life’s IP product has the option for a client to exclude mental health claims but the client must not have any mental health related pre-existing conditions or recent history to take up the option.

          • See pg 16 of TAL PDS – reduces benefit period for MH to 2yrs. Fairly restrictive and not available if client has a history of MH. Consequently it would be a brave adviser who’d recommend this option to clients who have no history of MH. A few other insurers had this option (i.e Zurich) but have dropped it.

  4. I have heard some “lame” statements before and done outrageous ones but they have come from the Anthony Mundine or Pauline Hanson congratulations Mr Williams you have joined an exalted club for making ridiculous statements I quote ” the horse has bolted”
    What was the point of the ” get together” if and I quote ” you make a valid point” issues of overall concern not just education of advisers are to be ignored Frsnkly it appears that nothing of concern was ever addressed in 3 days
    I am sure that there will be far reaching issues come the 1st of January 2018 and those issues will continue to spiral out of control as further reductions in commission take place “claw backs” that we have no control over further damage our cash flow and individual advisers are forced out by the banks who instigated this whole process to their benefit in the first place
    Education is extremely important the problem is there will be no one left to educate and anyone joining the industry has one huge fight on their hands to establish themselves
    LISTEN CAREFULLY there will be no commission structure by 2024
    That’s what the plan has been all along
    Don’t kid yourselves

    • Personally Ken, I don’t believe all the hype around all these new education requirements either. I guarantee if you look back through history, you’ll find that some of the biggest white-collar crimes were perpetrated by the most educated individuals who learnt how to manipulate the system – not average Joe’s who are just trying to make an honest living and look after their clients.

      This whole education thing is a furphy in my opinion and something that’s been put together by a bunch of hypocritical ministers who believe that’s what the public wanted to hear. Obviously a minimum standard should apply but these over the top education requirements are just ridiculous in my opinion.

      If ministers were forced to do as much study and abide by as much compliance obligations as we now have, I strongly suspect they’d choose another profession.

  5. Just disgraceful. It absolutely infuriates me to think we voted these self serving clowns in to office.

  6. This pretty much sums up the whole process from day one.

    It appears nothing has been learned or listened to.

    We will end up with a diminished retail Life Insurance Industry and many Financial Planners will do their sums, realise that there are limited opportunities in the risk space, with too much Business risk based around the current LIF, in conjunction with ongoing inefficiencies from Life Companies.

    Instead, they will focus on more profitable areas that will not hinder their Businesses.

    The end result will be less quality, more ineffectual cover that will not properly look after Australians, with the inevitable blow out in the budget due to Tens of thousands of extra people each year being disabled and becoming welfare dependent, because of insufficient and inferior insurance products being sold to them by vertically Integrated Businesses and direct product floggers who will be able to go on the rampage due to what has been immoral behaviour from vested interest groups and politicians who are either too stupid to understand their actions, or are beholden to these vested interest groups.

  7. Have I missed something in this twilight zone of corruption? While these self interested ‘entities’/groups and politicians were busy looking busy, justifying the money we pay them to live and retire in luxury, what were the life companies doing? Did I miss the part where they lobbied for maintaining commissions so their advisers would remain adequately paid for their work? Did I miss the part where life companies lobbied and fought hard to keep the claw-back period at 12 months? I have obviously also missed where insurers took to task a system bent on outcomes that were diametrically opposed to the best interest of the client. What happened? What did the Life insurance Companies do to attempt to halt this unmitigated disaster? What did they even do to show they were concerned for advisers, please tell me.
    I concur with all comments so far here, especially the chilling portent of the future in Jeremy’s examples. I’ve never found Jeremy prone to hyperbole so his comments very much concern me – he knows what he’s talking about and is one of the most astute in the game. Could someone please, seriously, educate me about exactly what it was that life companies did to fight on the side of the adviser, given that our goals and interests seemingly are the same? What form did it take, this fight-back by the insurers? Anyone?

  8. @ Brian Howard
    No twighlight zone,….. just unfortunate reality because the life companies don’t give a “rats pertuity” about the adviser or the client
    The goals were never the same.
    Life companies have no morality, promote mediocre management which leads to mediocrity throughout the organisations and don’t seem to grasp the concept that the adviser is their client,… and the person on the piece of paper they hold, is our client.

    The life insurance companies are on a systematic trajectory to go via the Direct route and use online technology for new business, … so why would you need to pay an adviser ?
    That was the starting point to reducing commissions, (eventually down to 20.0% level) and increasing “clawbacks” to a 2 year responsibility.

    The second step was Increasing premiums was the next opportunity by the the life companies in an ill-conceived attempt to drive a wedge between advisers and their clients. Can you think of any one life company who hasn’t jumped on that bandwagon since the LIF legislation ?

    The third step was to make old legacy products so unattractive by increasing premium rates to a point where advisers (at their peril) are forced to consider new inferior products with lesser contract terms.
    Even the Sally Loane from the FSC is advocating the eradication of legacy products even though the contract terms are better than what a client can buy today.
    The woman is an abject disgrace to the position and the life insurance industry

    The consequences will be dire for advisers if an inferior product replaces a better one because of lower premiums, and the situation is that a client may have claimed under the old one,…. but can’t under the new inferior one.

    No self respecting adviser will be able to survive full time solely on providing risk advice under those terms unless the premium is in excess of $10,000 to compensate them for their time.
    Risk advice will become a loss leader for many and will be offered as supplement to most advisers incomes, if at all, as a rider to the main game of financial advice.
    Think about it !

  9. @ Brian Howard
    No twighlight zone,….. just unfortunate reality because the life companies don’t give a “rats pertuity” about the adviser or the client
    The goals were never the same.
    Life companies have no morality, promote mediocre management which leads to mediocrity throughout the organisations and don’t seem to grasp the concept that the adviser is their client,… and the person on the piece of paper they hold, is our client.

    The life insurance companies are on a systematic trajectory to go via the Direct route and use online technology for new business, … so why would you need to pay an adviser ?
    That was the starting point to reducing commissions, (eventually down to 20.0% level) and increasing “clawbacks” to a 2 year responsibility.

    The second step was Increasing premiums was the next opportunity by the the life companies in an ill-conceived attempt to drive a wedge between advisers and their clients. Can you think of any one life company who hasn’t jumped on that bandwagon since the LIF legislation ?

    The third step was to make old legacy products so unattractive by increasing premium rates to a point where advisers (at their peril) are forced to consider new inferior products with lesser contract terms.
    Even Sally Loane from the FSC is advocating the eradication of legacy products even though the contract terms are better than what a client can buy today.
    The woman is an abject disgrace to the position and the life insurance industry

    The consequences will be dire for advisers if an inferior product replaces a better one because of lower premiums, and the situation is that a client may have claimed under the old one,…. but can’t under the new inferior one.

    No self respecting adviser will be able to survive full time solely on providing risk advice under those terms unless the premium is in excess of $10,000 to compensate them for their time.
    Risk advice will become a loss leader for many and will be offered as supplement to most advisers incomes, if at all, as a rider to the main game of financial advice.
    Think about it !

  10. The sad thing about this is, all our issues with Financial Services Legislation are being heard only between ourselves on sites like this. We need to put out to the public utilising every type of social media available to awaken the General Public how the Government Regulations are going to impact them. We have an election coming up, we need to also hit every social media avenue available in the Politicians electorates to give them something to have to defend.. How do they defend making a policy that is going to cost Mums and Dads fees to purchase Life products etc, etc.
    We need to hit them on every front. they actually like us sniping at them among ourselves, as nothing is going to come before the publics notice. This needs to be a well planned attack, not an hit a bit here and a bit there. Wars are won with great planning and execution.

    • Well said, Reg. What is the AFA doing about this because we pay fees to belong to it? And even if we’re lapsed members we won’t be for much longer it seems.

Comments are closed.