Royal Commission Questions Ongoing Use of Life Insurance Commissions

September 26, 2018

The Banking Royal Commission has questioned why life insurance commissions should remain as a carve-out to the conflicted remuneration provisions of the Corporations Act and why they should not continue to be reduced to zero.

The Commission posed the questions as a ‘policy related issue’ arising from the insurance hearings which concluded last week, and included them in a document released through its website, which is open for comment until 25 October.

Under a section titled ‘Sales’, the documents stated, “Should monetary benefits given in relation to life risk insurance products remain exempt from the ban on conflicted remuneration in Division 4 of Part 7.7A of the Corporations Act 2001 (Cth)?”. The document also asked, “Why shouldn’t the cap on such benefits continue to reduce to zero?”

“Why shouldn’t the cap on such benefits continue to reduce to zero?”

Further questions asked if the ban on conflicted remuneration was sufficient to ensure that ‘sales representatives’ do not use inappropriate sales tactics when selling financial products, and if other changes, such as further restrictions on remuneration or incentive structures, were necessary?

The sale of direct life insurance was also questioned with the policy issues document stating, “Should the direct sale of insurance via outbound telephone calls be banned?”, adding, “If not, is the current regulatory regime governing the direct sale of insurance via outbound telephone calls adequate to avoid consumer detriment?”.

Claims handling procedures were also considered with the document querying whether ASIC should have jurisdiction over the handling and settlement of insurance claims, and should life insurers be prevented from denying claims based on pre-existing conditions that are unrelated to the claim?

Submissions regarding the policy document and the round six hearings related to insurance can be made via the Royal Commission’s website.

  • Andrew

    what a surprise… the outcome the banks desire is coming faster than we all expected. zero comms to advisers and full control back to the banks. FSC leading the way. pfft

    • Phil

      No surprise…wonder if council in royal commission has their own agenda. TYPICAL with lawyers!

  • Mervin C Reed

    As the commissions get reduced down over time the Life Insurance companies will one by one leave the industry moving the capital employed elsewhere. Existing policies will be allowed to run off and no more policies written. They do not have to offer terms which is what the lawyers forget.

    There will be no commissions paid and no sales made and no tax revenue and as a result we will have a totally pure and equitable system with no business being done, at all, and thousands of people with no jobs.

    Who do the left wing lawyers who dream this stuff up, think the tax revenue comes from?
    If there is no life insurance then the impact on the Federal revenue will be immense when people die un-insured.
    There is no other way to do this, and the stupidity of all of this is a bunch of lawyers who think that people will work for nothing.

    It is the soviet principal of we will pretend to work when they pretend to pay them.

  • Katherine Hayes

    Where can we make comment on that document if we want to provide a response? The link simply links to a pdf document with the list of questions only.

  • emkay

    And yet the union funds remain without any real investigation? This is very much looking like a way to destroy the insurance industry so the union funds become the only insurance option. I wonder if these left wing lawyer idiots have ever read the TPD definition offered by some of these “members” funds?

  • Jeremy Wright

    There is absolutely no difference between a junior solicitor and a QC, therefore all solicitors, Barristers and QC’s should immediately be forced to charge the same rate as a Junior Solicitor, though even that payment is conditional upon them passing the client Best Interest Duty and that their work is 100% correct and accurate.

    SHOCK, OUTRAGE from the Legal fraternity.

    Surely everyone must clearly see that there is a difference between a junior solicitor and a QC and as to this business of BID and a obligation for accuracy, how on earth is the Legal Industry supposed to survive if these outrageous and anti Lawyer rules are imposed?

    What I find amusing, is when I turn the blow torch back onto the perpetrators of unjust rules or conditions they try to impose on me, they become very indignant and defensive.

    The time has come to start turning the blow torch back against everyone who tries to bend the truth to benefit themselves at the expense of others and the fact that the AFA are starting to speak up, with plain English explanations, backed up with facts, is a good start.

    My whole Business life has been about protecting our clients from the excesses and indecent practices that some at the Big end of town, try on at times.

    The great thing about this country, is if you are right, have knowledge and have the strength of character to fight, Big Business is not difficult to beat.

    The game has never changed. The way to win, is to know your adversary, then exploit their weaknesses and Big Business have many weaknesses.

    The Associations and bodies that represent us and all Australians, are NOT all knowing.

    They frequently get it wrong. We only need to review the past few years to see that.

    A supposition from a Ivory tower Lawyer, has as much credibility as a Media blast.

    The purpose is to attract attention and not to worry too much initially about the facts.

    The big advantage for the Legal Eagles, is when they put forth a Supposition, it must be taken seriously, as after all, they are charging Thousands of dollars a day to lecture from the Soap box, so what they say, must have credibility, does it not?

    The Royal Commission will put forward many Suppositions.

    Let us hope, we have the right people to question and if necessary, turn the blow torches back on anyone who speaks with little knowledge or credibility.

    • Squeaky_1

      The way you were talking there for a moment Jeremy I thought you were going to announce you’d had enough and were going to take it up to the bastards, like has been suggested before about you in these pages! Disappointed it hasn’t happened. God knows, we all have the anger and reason to fight it but not the obvious wordsmithery, focus, cohesiveness and force that you would bring to bear on these govt parasites. How about it? Part time?

  • Rob

    Lawyers stick their beaks into the insurance industry. Why and only why. They make money from other peoples misfortune. Like 40 to 50% commissions. Where is it that they must care about their clients. Well constructed, fully underwritten insurance is a lawyers curse. Not good for their business. That is why they want to run us out of town. Lets have a royal commission into the legal profession, claim farming is rife.

  • James

    I cannot believe that its the opinion of the lawyers at the royal commission that sales agents should be paid commission however advisers should not be. Advisers are the only party who actually care about the client and want the best outcome for the client. Sales reps at the insurers just want to sell sell sell to make their targets and move onto the next sucker.

    Don’t even get me started on the help an adviser provides at claim time.

    No commissions mean no access to insurance advice as advisers will simply stop offering it as part of their services. This will force the vast majority of people to go direct to the insurers and their decision will be based entirely on price.

    Who will ever want to be an insurance adviser? It’s not a glamorous profession. It’s mostly irrelevant paperwork now days anyway which is never even looked at by most customers.

    Commissions will however go. Insurance advisers will become aligned with/employed by individual insurance companies. They will cease to be bound by best interest duty and cease to give assistance at claim time. Insurance companies with the biggest marketing budget will thrive and the customer will unlimately lose.

    Lawyers will be the big winners and their greed is already showing with all these law firms offering to help at claim time (for 30% of the payout minimum). They make me sick and I cannot believe their predatory tactics to rip off claimants is not a focus of the royal commission

    • paulkate72

      You have a point there. Yes, law firms offering to act in behalf of TPD and the like haven’t been in any way the focus of the RC. Yet they pick up very substantial fees for this leaving the client with – I’m told – less than 70% of their total claim. Hmm, something not quite kosher here.

  • Ken

    The fallout of a no commissions system will have create massive issues I every area starting with thousands of redundancies of adviser staff as advisers stop writing new business for little or no return and concentrate on their renewals retention to carve out some sort of income
    People who be grudge insurance and are only reminded of its benefits will “drop off” leaving the health system and the social security system in kaos not to mention the Australian workers as premiums for health cover soar and social security becomes more difficult to obtain paying less and for shorter periods
    The ombudsman’s service whoever ends up with that will be driven to lengthy delays of months or years before a decision can be arrived at ( if at all ) and the solicitors gouge even larger profits from a long term client win.
    Business’s go bankrupt as the required insurances ( partnership etc ) are never even considered let alone recommended
    And it goes on and on
    Hasn’t anyone taken the UK ordeal into account when considering this outrageous decision of wether to keep commission structures in place or not ? New Zealand looked deeply into it and decided it was not in anyone’s best interest to remove them
    Commissions cannot be

  • Ken

    Be conflicted if everyone is paying the same rate ( sorry for this part two got kicked out and had not finished typing this from Bali )
    It is now or never for our industry to educate this beureocrats on what we do and it’s importance to our country let alone its citizens
    I urge you all to put your concerns to the commission
    25,000 advisers cannot b ignored
    Do it now