NEOS Life has released a statement this week, in which it calls for the life insurance industry to unite in support of risk commissions.
NEOS Life MD, Brett Yardley notes in the statement, “It’s great to see that others in the industry are now standing up and providing public support of risk commissions.”
He stressed the critical importance of the industry coming together to engage and educate government, regulators, the media and consumers “…on the important role risk commissions play in ensuring Australians of all walks of life have access to quality financial advice and appropriate life insurance products.”
NEOS Life notes it first came out in support of risk commissions immediately following the release of the Royal Commission’s final report (see: Industry Response to Royal Commission…), in which Yardley said NEOS firmly believes that commissions are a reasonable and appropriate option for remunerating advisers for their efforts in assisting clients.
He says the industry now has another two to three years to demonstrate that the Life Insurance Framework remuneration reforms are sufficient to address the concerns of regulators: “One way of doing that is by making sure the amazing stories of care, compassion and support that we hear each day about the services financial advisers provide are given a public voice,” urged Yardley.
He added that NEOS Life will be seeking to actively engage regulators and government on the importance of ensuring risk commissions remain. “As a business solely focused on the advised segment of the market, we want to ensure that we’re supporting financial advisers with more than just words,” said Yardley.
Lets please not forget the history of the LIF.
Firstly we had ASIC review only 200 files of targeted advisers. Even though this was small and targeted to advisers they knew to be churning even ASIC had to admit in report 413 that hybrid commission (80/20 with a 1 year clawback as it was) led to a good outcome for customers.
Secondly we had the FSC members who knowingly had the true lapse data but did not pass this onto ASIC.
Thirdly we had the FSC members agree to a reducing commission structure and 2 year clawback that would only benefit them financially.
Fourth (and after the LIF) was passed we had ASIC admitting that churn was in fact only reflective to a small number of advisers (after the same FSC members were asked to pass on lapse data to ASIC).
There was no reason that hybrid 80/20 with a 1 year clawback could not have been to appropriate way forward but the insurers were just greedy in unfairly using the flawed report 413 for their own benefit.
The same FSC members are now all in a panic. New business is falling as advisers cannot afford to write it and they know that customers don’t want to pay fees. They also know they can no longer afford to rely on direct business since the Royal Commission.
And lets not forget that the issues of the Royal Commission were reflective to direct sales, not advised risk.
The answer is not just about the insurers uniting. Its about the FSC and its members confessing.
For risk insurance commissions work for the customer. We know it, the insurers know it but they themselves are to blame for the misrepresentation and misinformation to government.
If they (the insurers) want to be in business in 3 years, they not only have to both confess and convince government but they also have to lobby for a sensible remuneration of at least 80/20 with a 1 year clawback. If they simply lobby to keep the LIF as it is we won’t be writing business for them anyway in the future. WE CANT AFFORD TOO!
TB has made some very valid points and it was like a nightmare revisited.
The saving grace is that the Mortgage Industry has already set up the path to have any future reductions of commission overturned
The case for Risk advisers is stronger than the Mortgage Industry, so I am actually starting to be more confident for the future of risk advice.
In 2 years when ASIC hands down their latest report, the world will have moved on and a decline in Business is the greatest motivator for Life Companies to have an epiphany and start telling the truth to Government, compared to the disgraceful actions by most of the Life Companies via their mouth piece the FSC in the past.
FASEA must be changed so Risk advisers can continue and the 2 year write back must be made fairer, to ensure a continuation of the Retail Life Industry.
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