Should the Government reconsider banning risk commissions along the lines of advised and unadvised insurance, rather than individual and group insurance?
- Yes (83%)
- No (15%)
- Not sure (2%)
The recent call for the Government to reconsider its position on banning risk commissions on group and default insurance policies is re-shaping the broader debate on banning risk commissions.
The argument is that the Government should not be making a distinction between individual and group risk, but should instead be distinguishing between advised and unadvised insurance.
So, our latest poll question asks:
Should the Government reconsider banning risk commissions along the lines of advised and unadvised insurance, rather than individual and group insurance?
The argument in favour of this question comes from CSSA President, Douglas Latto, who recently commented: “There is an assumption that all group insurance is unadvised. “In fact, a lot of group insurance is advised. The distinction that should be made is not between group insurance and personal insurance but between advised insurance and non-advised insurance; that is the more important distinction.”
If this position was adopted by the Government it would still mean that no commissions would be payable on group insurances placed for default and other group insurance schemes where no advice has been provided to the superannuation fund, but it would allow commissions to be paid to specialist advisers who have provided their advice services to the fund administrators and decision makers.
The view against this proposition is that risk commissions on group superannuation schemes reduce the accumulation value of member investments, leading to lower retirement incomes and that they are also considered to be an example of a conflicted remuneration structure the Government is seeking to abolish.
We are interested in your views on this question. Let us know what you think…
Add your comment now
14 Comments
Go Douglas,you are 100% correct,the Govt are inept and ill informed,totally clueless is perhaps a more apt descriptive.
Default insurance is just a mere safety net in most instances, when offered as part of a total package. An adviser can charge a fee for service to set up such funds.
Further insurance above the default amount arrived at through consultation with the members, should result in commissions being paid for the work done.
Most funds include insurance, so the argument about reducing retirement benefits is a wasted opportunity to educate the member abut what happens to their money.
I am certain, few members still really understand what happens in their super fund.
Could the real reason the gov want insurance kept outside of superannuation be because they see it as a tax loop hole?
Who is going to assist the client at claim time? Who is going to ensure the members know what they have and how valuable it is? Who is going to help them maintain the cover when they leave the employer fund? Oh, that’s right, it won’t matter, because the Governments new disability benefitt proposal will be adequate for everyone, and will not cost taxpayers anything apparently!
There seems to be yet another permutation on what constitutes a reason to pay Commission ?
The industry funds are still “beating their drum” on no commissions to financial advisors who i am sure that without confusion on how Super Funds work would be twice as bad as the lack of knowledge currently being shown.
I would ask if anyone knows where does the money come from to pay for all the Television advertising ? Havinf been involved with media in the past we are talking telephone book numbers!
Commission for effective advice pales into insignificance if you compare them as an expense ! to the fund???
Commissions on Risk Insurance should be 100% allowed irrespective of the situation. The issue is more in the uniformity in the level of commissions payable. All insurers should pay the same levels of commissions depending on the type of insurance - i.e. individual, personal super, corporate super, group etc. It then comes down to product features, admin, underwriting, claims and of course the services offered by the adviser. Come on people, this argument is simple - the government needs to stop tampering with our livelihoods and those of our clients - underinsurance is a big enough problem already. As long as costs/commissions are fully disclosed, the client remains informed. As for unadvised funds, members have fund choice as their opt out - the same option for other super funds, advised or not !!!
It is utterly niaive to imagine that group insurance within managed superannuation products will have lower premiums if commission is banned. Providers will have to revert to other marketing and distribution models, probably with higher costs, which will be bundled into premium charges. People simply do not buy risk cover, their needs must be identified to them and a solution sold to them. Without proper distribution the under insurance problem in Australia will multiply bringing financial hardship to numerous families who lose a breadwinner to death, disability or illness. Further this financial hardship will place new strains on the already overburdened welfare system.
Agree with this as a very straight forward differentiator. advice incorporates disclosure on costs and adviser renumeration and should include the offset clause re longer term lower fund accumulation, the trade off as part of risk and reward outcome.
However I suspect that this is far too much of a common sense solution for this Government to understand, given their underlying objectives for major structural changes in favour of their “never to be admitted to” mates.
The Labor Govt should stay away, altogether from private transactions between an adviser and it’s client. The whole agenda of this obviously incompetent left wing govt, seems to centre on giving support and advantage to their backers the unionist industry super funds, rather than to improve the advice given to individuals. The whole debate, should be centring of giving more Australians access to qualified advice, rather than killing off so many advisers and setting the industry back decades and for that matter the financial well-being of Australia as a whole. Gillard & Co back off and concentrate on thinking up ways of saving your necks and that of the greens and the independents, that supported you, at the next election. I am sure the electorate will realise the error of it’s ways in putting these idiots in and uncerimoniously boot them out and deliver a landslide victory, to the only govt that seems to handle the economy responsibly, the conservatives. God help us all and lets hope the damage done by Rudd and Gillard can be kept at a minimum, for the sake of us and our children.
The easiest way to overcome the commission argument,is to ban commission on the 9% employer compulsory contribution and any Insurance set up outside the 9% amount,via salary sacrifice or Employer top up cover, should be left open for the market to pay advisers commission for all the work in advising and maintaining the employee’s cover to suit their needs.
(including representing them at claim time)
However, to play fair and make it a truly level playing field,Insurance premiums held in the 9% Employer contribution, should be capped at 10% of the contribution amount up to $4500 and 5% for every dollar above that.
Eg: $50,000 salary x 9% Super contribution
= $4,500.00 x 10% cap = $450 total premium allowed for Insurance premiums.
This overcomes the problem of a dilution in the fund, as 90% of the 9% contribution is allocated to Investment.
Then advisers can get on and do their job, which is to advise and negotiate on behalf of employee’s,the best Insurance package for them,regardless of whether it is individual,group or corporate Insurance.
This will allow a clear seperation of advised and non advised Insurance cover and the Industry Super funds and bigger players can fight it out for the capped Insurance premium amount and leave it to the market to negotiate top up Insurance coverage which will enable Insurance advisers to survive in the future and help rein in the massive under-insurance epidemic in Australia.
Our job is to advise and in order to compete with the Industry Super funds, who seem bent on destroying Insurance advisers businesses,we must be given the ability to work in this difficult field and be paid commission.
All the research has concluded the same thing,in that clients will not pay appropriate fee’s for Insurance advise to cover our expenses,let alone make a profit and any fool that says otherwise, obviously has never been in front of clients.
If the Government,under advise from Industry Super lobbiests,prevent advisers from being given the opportunity to run their Businesses in a fair manner,then there is just cause for legal action due to discrimination and blatent anti-competition violations against Insurance advisers.
This solution I have proposed,allows all the participants in the Life Insurance Industry to compete and gives employee’s the opportunity to access professional advisers,who after all, are the only ones who fully understand complex Insurance contracts and will fight for their clients at claim time, as well as sort out all the confusing paperwork from beginning to end.
Australians are already heavily under-insured. I am in the industry for 5 years and have never met anyone yet who has industry super fund and have right level of protection and appropriate strategies in place for his/her family !
The government once again with its one size fits all mentality is again seeking to interfere in the lives of our clients with a prescriptive approach for insurance. Inept and incompetant does not even begin to describe the story. As to their disability scheme - this will remain largely unfunded and cost taxpayers a fortune over time. The result with a disability pension approach is that the cover is nowhere near the amount required to allow a person to live with dignity. A national disability scheme is a stupid attempt at ensuring the most vulnerable will remain in a state of poverty for the rest of their days. If clients were encouraged to have private insurance, my clients that have had claims paid will attest to the value their income insurance and tpd polcies along with trauma and death benefits have meant to their families at the time when it counts. This stupid government just does not get it. Medicare is supposed to provide a basic level of health care. It remains largely underfunded and the waiting list is long at any hospital. With private insurance for health, you are able to get attention now. So if more are encouraged to ditch their life cover and not seek advice but merely rely on a government solution, the result will be a disaster. Just like a damn labor government to come up with stupid schemes to hit the taxpayer more and waste taxpayer dollars on incompetance. Get rid of this government and its pack of fools.
I am sick of their arrogance when they are caught being incompetant. Another labor scheme - No thanks
I disagree with Jeremey about quarantining the 9% contribution. That money belongs to the member in exactly the same way that their take home pay belongs to them. Would any government dare to legislate as to how someone spends their take home pay? Do they force people to stop wasting it on all sorts of extravagances and save it for a better life? Of course they don’t! Then why should ‘their’ super contribution be different. I have clients who are happy to build their retirement nest egg elsewhere and are more than happy to use as much of their super contribution as needed to fund as much of their insurance requirements as possible. Similarly, people use existing super accounts to fund cover as this helps alleviates the stress on their current cashflow. Therer are numerous examples. Further, if a member of a corporate fund wants to use their 9% to fund cover via an adviser then that is their choice. Most won’t (or can’t) pay extra just to have cover in their plan. If the government wants to suddenly take control of peoples spending, taking a ‘we know best’ attitude then why limit it to super? Ban gambling, ban smokes etc etc. They don’t care about people wasting money there do they? This government telling people how to save money is somewhat ironic I feel.
Lets face it,
Commissions on insurance are only really paid by the insurance companies so they can avoid most of the work in finding, signing up, advising, & complaint handling.
As an adviser if they remove commissions I don’t really care because it just means that I will pass all that work back to the insurance company and discontinue selling any product that I don’t get paid for. I am still happy to charge clients to do the work, but that’s my choice. I am sure that will be the result for most advisers.
Bye Bye to insurance complaints, Yippee