Will you be forced to charge a fee to service your clients' insurance claims for superannuation risk policies written after 1 July 2013?
- Yes (91%)
- Not sure (5%)
- No (4%)
The most contentious outcome from last week’s Future of Financial Advice reform announcement was the Government’s decision to ban risk commissions inside superannuation.
There are so many issues and questions associated with this move, such as whether most consumers will in future be able to afford superannuation risk advice. We will monitor and report on all these questions.
But today we are asking what impact, if any, will the banning of risk commissions in super have on how advisers will deal with insurance claims against those policies. Our question is:
Will you be forced to charge a fee to service your clients’ insurance claims for superannuation risk policies written after 1 July 2013?
Responding to the banning of risk commissions in super from 2013, one adviser has commented to riskinfo:
“I have paid claims to a number of average Australians over the past few years and not one of them complained about commissions rather the great assistance my office gave them and their families.”
But will this ‘great assistance’ only be possible in future if the super insurance client pays a fee in return for the support from the adviser and his/her staff?
In previous poll comments, advisers have said they will stand by their clients in their time of need regardless of whether they will have received commissions on their policies. Is this now still the case?
Will advisers write their clients’ insurance outside super because they will simply be unable to afford to serve their clients’ needs at claim time unless they are forced to charge a direct fee? Does this represent a new conflict of interest?
Will some advisers contemplate agreeing with the client to charge a small percentage of the claim amount as one way of overcoming the client needing to pay a fee out of their own pocket for the adviser’s time and effort? But what if the claim is rejected?
So many questions!
Tell us what you think. Tell us about the answers you can envisage for your own business. We ask that your comments focus on solutions!…
Add your comment now
31 Comments
The proposed banning of commissions will not only increase government disability support pension payouts due to the lack of cover that the average consumer will no longer be able to afford, however will increase the running costs associated with many Financial Planning practices effecting the great work they already do and put unecesary pressure on jobs and only expose the under insurance issue that Australia is already facing further
We have never had any of our clients complain about the way we are remunerated and have paid many claims out over the past 12 months having made a significant impact on our clients lives by providing funds when they were needed most
It is a terrible thing to burden on either the insured or their family at a point in time when they are financially vulnerable to charge a fee at claim time - can’t the powers that be see that commissions serve this purpose on life policies. Very disillusioned with trying to understand what they are trying to achieve. The solution? Leave commissions - if they must why not legislate that commissions are paid at certain rates? I have no desire to charge a client at a weak point a fee - and will not be doing so, but if the changes go through I really don’t know what to do!
This is just simply ridiculous proposed legislation. Why should Government interfere in areas such as this? Surely if it is most appropriate for a person to have their insurance cover within a superannuation fund (as is very often the case) there should be the ability for a financial adviser or insurance adviser to receive a commission payment for organising that insurance, as there will continue to be if it is established outside of superannuation. Why promote an un-level playing field that has the potential to lead to advice to clients that may not be in their best interest? What possible motivation could there be for such a ridiculous idea? This is certainly not going to assist the general public in any way whatsoever.
Forget about claim time, we need to address the whole notion of a “servicing adviser” under these proposals. Who in their right mind would accept the professional risk and responsibility of putting their name against a policy as an adviser and receive nothing in return?
Can I encourage individual advisers to write directly to their local MPs and ask them to raise your concerns with both Bill Shorten MP and Mathias Cormann (Shadow Min for Fin Services and Super)
Gillard and her bunch of “unionists” should look at the overall good things that we do for our clients rather than the shameful actions of a handfull of idiots which present themselves in all industries.
Banning commissions is not the solution as we have been diclosing fees/commissions for many years now. As long as clients know what they are paying in $$ terms there is no problem.
If the Govt is not happy, then are they admitting that their disclosure regime (SOAs, PDS’ etc) is where it’s gone wrong? ASIC should regulate uniform maximum costs/commissions across investment and risk products. This will then stop advisers supposedly preferring one product over another because of the opportunity to earn more.
Come on, all that’s going to happen is that clients will have to pay more for the services we provide. Defeats the purpose doesn’t it!!!
If, during the advice process, it is determined that placing insurance cover within superannuation is in the best interests of the client, who is going to pay for the on-going review of this cover and what funds are to be used to cover the adviser’s time and effort in the event of a claim? We already have an under insurance problem - having to charge a fee to review covers or process claims for insurance via superannuation funds is going to exacerbate this problem. Let’s be reasonable, with commissions paid by the insurer to the adviser allow every Australian to implement basic insurance to ensure their families are taken care of. If these costs have to be met by the client, this will not be the case.
No one wants to pay for insurance advice. Hell, not even I would pay for insurance advice. None of my clients care about commissions, particularly if we have helped them with a claim.
The value of advice is now in the bin. Risk insurance will become equal to a general insurance product and will have nothing to do with life planning. Each year it will need to be renewed and guaranteed policies will dissappear. Hopeless, legislation on the run.
labor government=labotomy=unions. Do any of the above work for nothing? Maybe the unions can give advice- now where will the regulators come in on that one. The whole idea was for advisers to justify being paid–doing their job. Some clown polly came up with an idea to make a name for himself and it has backfired into something that no one wants. The trouble is that the committee of pollies who were to advise on this matter had absolutely no idea of what was going on; just ask the likes of one member in the Far North. I can give you the answer, she had no idea and yet these clowns –sorry elected pollies– came up with this scheme. Back to the questions. Common sense must prevail and the industry WILL come up with a means of fair renumeration. Fee for service is an easy model to work with— Maybe some of us working this way can enlighten those having issues in this area. BUT, no one works for nothing, especially pollies and unionists, so why do they expect educated planners to work for nothing or does the red hair show true political colours?
It’s time advisors, BDM’s, life offices, fund managers,licencees and industry association ALL took a collective stance WHICH THE PUBLIC CAN SEE AND HEAR, given we are ALL going to suffer from the proposed legislaton/s.
Think on this. How can you act in a fiduciary duty towards ANYONE without taking some time to understand there REAL issue ? THE CLIENT SHOULD RESTRICT THE ADVICE - no every tosser in a call centre will provide transaction advice or scaled advice - and will commit a fundimental breach each time - ie not knowing the clients ! Well done Shorten.
Can’t you all just accept that banning commissions on risk policies within super will prevent another Storm!!
I believe that the UK banned commissions on risk policies over a decade or so ago - only to re-introduce them, at higher rate, a few years later when ‘they’ realised that the levels of life insurance accross the country had plummeted.
The area that should have been targetted was CORPORATE super funds with default levels of cover. In those cases it can be argued that clients are not being serviced properly, if at all. I have clients who are locked into corporate super funds who have never seen an adviser and who prior to speaking to me didnt even know they had insurance. How many of these people are missing out on claims because they don’t even know what they are entitled to? The blanket ban on super vs non super shows how stupid the minister really is: he obviously had made up his mind before any of the submissions were even received and is badly misinformed. It can be the only explanation for such a poorly thought out set of “reforms”.
Of course, now that we have fidiciary duty, no commissions and a requirement to get the client to sign up for ongoing servicing, this should obviate the need for SOAs and ROAs!!??
PLEASE - write to your local MP about your concerns, or find one who will listen!
I agree with the vast majority who cannot see a reason for a ban on commission for life cover paid for via super. I suspect that if the legislation gets the go ahead- then the companies which offer life cover in super will strip out the commission component to give a base cost, the adviser will then be able to add a ‘fee’ (determined between the adviser and the client) which relates to that advice which would be deducted from the clients accumulation account. An ongoing service arrangement will be entered into which the client will have to renew every two years. I suspect that when you then add all this up and include the additional conffusion this will create - a simple monthly premium which includes the payment to the adviser is much simpler. This nonsense about commission on life insurance being conflicted remuneration is hard to swallow, and in my view simply incorrect. It will mean a big cost for everyone not to mention the life offices and the admin challenge these changes would mean…
I have to disagree with you Rebecca. I have about a dozen or so child care centres, spread accross the state, with corporate supers that I administer. I have only ever met personally a few of these members. They have a generous and flexible insurance scheme that I receive commission on. No matter how many times I write or e-mail the members, I can guarantee you that 80% or more don’t read what is sent. Further, I can’t give them any more than generic advice (legally) without treating them as an individual client and undertaking fact finds etc etc. They, or thier families, do come to us, however, when they have an accident, when someone dies, when they get married, when they move house etc. In a little over a year we have handled three messy income protection claims and a death claim. Most of these cases would have been brushed aside (or at best been made very difficult) if they were to deal direct with the insurer in a ‘commissionless’ world. With these types of funds, from both an investment and insurance perspective, there is a high level of apathy amongst members. Sure, there may be lazy advisers who should be doing more to keep these members informed, but how will that improve under these new proposals? Do you honestly think the average working person in a group super is going to pay (not out of their super mind you)for someone to tell them what they have and what they could do to improve it? These changes will greatly increase the apathy out there - no question!
My solution to bad advice on insurance in super is to ban funding premiums with existing super funds or SGC contributions.
To complex to implement?
Ok only pay commission on insurance sold through the internal super fund vendors set up that take no contributions and pay no pensions and are for insurance only.
Then you use APRA to tell super trustees they cannot transfer existing funds or SGC contributions to insurance funds.
That would stop the only questionable practice in super insurance depleting a clients retirement savings to pay premiums.
Here’s a solution ..Why don’t we lobby the Govt to legislate allowing advisers to draw their fees from a client Industry Super Fund
..that’s a nice level playing field you say
……Dream on friends
I think this stupidity is going to take a change of Govt to break ..Shorten needs to hear this as does your local MP….get at them.
Another reform by “under-informed” politicians, who are so easily lead by the ISN. FOFA is meant to remove distortions from the market. This reform introduces a new and dangerous distortion that will hurt consumers and further damage the reputation of genuine advisers.
I reckon that, instead of their remuneration packages, politicians should be made to charge a fee for service.
Then there wouldn’t be any.
Maybe removing commissions on insurance in super is just a bargaining tool - to draw focus away from Opt In - just being cynical….
How long does it take to completly turn what should have been a reasonably simple process into a “nightmare” for not just the client but now the people these clients rely on to assist them with what they genuialy need to protect their assetts they have aquired over time from unfortunate,unforseen circumstances.
I thought the whole purpose of the excercise was to make things simple for the client to understand and too give them an option on how too pay for the advice.
There now appears to be no choice just one option! who will i be able to talk to that i can trust who won’t “rip” me off Is the fee i am paying regardless of cost going to give me the best advice ?? If not can i have a “winge” and who too ?
In short things were not that bad under previous conditions It was a few undesirable advisors who were targeted by the media and all of a sudden we area all “tared” with the same brush!
Please those in charge of this ongoing nightmare have a listen to the “Genuine” advisor who does not think off his duties as a job ! but a calling similar to every proffession worth “their Salt”.
Everyone needs guidance at sometime in their lives and i as many others have done have given it without the almighty dollar being the catalist.
The loss of proffessional advisors will happen,simply because they have been kicked from pillar to post for over 10 years while politicians pass portfoloi’s backward and forward
How many now have been in charge of these changes??
The banks and industry funds must be rubbing their hands together if the proposed legislation gets through to ban commissions via super. Banks and Industry super funds pay their employees wages and bonuses to write insurance business. What is the difference between a wage plus bonus paid to an employee who is tied to one company versus an independent adviser dealing with several insurance companies receiving a commission. The remuneration all comes from the same source. The only difference is the client gets better and proactive advice dealing with the independent adviser. If common sense doesn’t prevail we may need to get a job at a bank. Sounds like another pink batts scheme to me. God save Australia!!!
The arguement that they are banning commissions to stop advisers recommending one product over another is an absolute farce.
The banks and the industry funds only flog their one product anyway. The true professional adviser gives the client the choice of many funds.
If you want biased advice you need look no further than the banks and unionised industry funds that currently control 80%+ of the industry, and 100% of the FPA and the government lobby groups.
The banning of commissions is nothing more than a grab for market share, fully endorsed by the unionised labour government.
Hello to another (Woolies/Coles) style corporate Monopoly created thanks to an irresponsible government. The government loves this style of corporate Monopoly because it gives them less to look after. They don’t give a stuff about individuals and the cost to the average citizen. If they did they would create further competition not Monopolies.
Which banks are you talking about? I work as a planner with one of the Big 4 and we have 5 insurance companies on our APL, and all 5 are used. Are you saying i am not a “true professional adviser”?
Who will be responsible for the advice(Risk only) if the adviser hasn’t been paid for the Insuranace inside a super fund should his Professional Imndemity cover the client against any future litergation.I would say NO….well done Mr Shorten you have disadvantaged the client.
I have a client(female 23)in Australian Super Fund paying $149pa for $150k Life/TPD with Tower and the same client in a Retail Platform Super fund with $150k Life/TPD with ING paying $45pa.
I get paid 30% commission from ING what commission is paid from Tower to Austrlian Super.
Additionial clients with under insurance create an ongoing issue for the government as more people will turn to the “provider of last resort” the government to pay disability pensions & widows pensions due to this crazy new concept of no commissions from risk inside super well done Mr Shorten. I also assume if 90% commission is not to be paid premiums will fall substancially, let’s see how the big institutions react & if this savings is actually passed onto the client or pocketed to increase shareholder return??
“There are some really valued comments above and the savings if commissions are removed does not achieve the price variation you would expect.
To manage a claim properly and that needs a lot of care it can take longer than what is required for 1, 2 or 3 full advice deliveries.
Having had experiences with particular industry funds, it seems for example a TPD claim can be more difficult and refused quite easy without a lot of representation. One case; after the 3rd refusal prior to payment and 18 months of work it became apparent that rates were set on claims experience with their insurer. I could add so much here on experiences. It just numbs me and I feel I’ve had enough new challengers based on a need to always challenge my integrity and justify oneself. Passion, hard work and belief for the benefit of your clients needs to be recognised. Quality and value to my clients are my core beliefs and I’m just getting too tired to need these continued new challenges to our advice process and integrity.
Over the last 20 odd years, my costs to serve have increased at a disastrous percentage, for many why would we continue to bother?
Many direct mail solicitations and industry offers may seem cheap, but fail when you know the right questions to ask. It’s the way they often are packaged in terms such as premium frequency and really the most expensive insurance is the one that doesn’t pay.
Sadly a “well Priced” insurance placed for a family by a big 4 provider for their new home loan happened to be only for accidental death. Sadly the car he drove responded to well to his actions as a drunken driver. Wrong insurance sold!!!!!!!!!! This man was a medically confirmed alcoholic so I guess the “advisor” wether over the counter (?) not sure but I thought the “know your client rule” would have been ideal application to the advice to ensure the right cover. Sadly the remaining family continue to “pay the outstanding premiums for the rest of their lives” they now rent a home. The “funny” part about this was the way it was sold, seemed cheap, but was actually slightly more expensive than our “death by any means”
These are the items the gov and asic should be taking to task. So many people out there think they have “real insurance cover”
I guess well hand it over to the governors whom mostly have not ever had or lack great realistic employment or private enterprise skills for the length of experiences in many cases is government roles and politics. But they’re “well educated” and know what’s best for us.
My passion needs to be re-directed as the those currently leading will turn anyone sour.
Hey, my glass is always “half full”, I just needed a outlet, thanks for reading.
For Kevin’s post at ‘#27′ I trust the $45 is probably $145.”
I don’t understand the logic of banning commission on insurance within super and still allowing commission on insurance outside super. To me this actually creates a bias towards writing more instance outside super which may not be in the client’s best interest. If the Government is trying to reduce fees on super they should continue to allow commission on insurance within super as the fee we will need to charge to cover our advice cost will in most cases be more than the premium reduction as a result of commission being removed from the insurance premiums. I believe clients will end up paying more overall.
Here are my thoughts - which are shared by DKN Financial Group. The removal of commissions from insurance cover established in superannuation funds is not a good outcome for the average member. Lower income (typically younger) members will find it difficult to pay for advice that under the present arrangements, makes it possible for them to have a Financial Planning relationship. For many Planners the risk commission received from superannuation makes it possible to maintain, service and (where a claim arises) advocate for these members economically. Any resulting reduction in premiums will fall short of the cost to service these fund members with the outcome only amplifying the state of underinsurance in Australia and increasing the cost of welfare in the longer term.