Advisers can see no alternative other than to charge their clients a fee to help serve their future superannuation insurance policy claims.
90% of advisers appear to have reluctantly answered ‘yes’ to our question:
Will you be forced to charge a fee to service your clients’ insurance claims for superannuation risk policies written after 1 July 2013?
Most adviser feedback has centred on the broader issues associated with the banning of risk commissions in super. For example, a number of comments have been directed towards the likelihood that less life insurance business will be written, leading to more individuals and families being exposed to a bleak financial future if something should happen.
Some advisers have considered new scenarios under which they may be remunerated for providing superannuation insurance advice, and therefore able to avoid charging a fee at claim time:
… life companies instead of paying us the commission can rebate the normal commission to the client’s account and we charge a fee to the client’s account for the same amount or less if we charge a fixed fee. This way we still win and so will the client.
Another adviser has suggested something similar, but at the same time observed the silliness of needing to do so in the first place:
… I can charge a fee for service the equivalent of say 1% of funds invested deducted from the clients super and this is legal because its a fee, not a commission. Where is the point of difference. There is none.
Another adviser has pointed out that under current rules, there has existed a practice of charging less wealthy clients a much smaller fee for their investment and superannuation advice because the adviser was able to be appropriately remunerated for their services by the commission included in the superannuation insurance contract:
I am sure that many financial advisers are able to provide discounted investment advice to low income earning clients because some of our costs are offset by the risk commissions received from these clients.
The implication here is that the banning of commissions for insurance in super will remove this opportunity to to provide affordable advice to many low to middle income earners and will also make it difficult not to charge a fee at claim time.
Broader issues were also the main focus for this adviser:
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?
From another:
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.
The implications of banning commissions on insurance advice in superannuation are many and varied and we will monitor and report on developments. Take this opportunity to have your say on how this ban will impact your services at claim time or on any other aspect of your advice proposition…
Lets face it this govt has no idea and refuses to see the problems. They can’t get past the view that advisers are making a lot of money and we as a govt have to ensure they don’t!! This is just pandering to the industry funds and we all know it.
Should the industry be surprised by initiatives to discredit and destroy the Financial Advising buinesses of Australia other than the subsidised IFFP group that supposedly Advise? Industry Fund members? Really Industry Funds are after FUM. They run IFFP as a necessity to capture super money that may leave industry funds and be placed in Pension/Investment products outside of the Industry Funds. That is why they grouped together to set up their own pension. All other supposed advice to industry fund members is just lip service. This includes having members of industry funds sufficiently and properly insured. Really we all know that the industry funds are the unions and the unions are this goverment. That is why you have Bill Shorten ex union ex Australian Super Industry Fund Trustee as the current Financial Services Minister doing what he is doing. FOFA is just a smoke screen. Why not bash advisers, they are an easy target, the FPA certainly don’t know how to stick up for us. Does anyone really believe the insurance reforms will achieve better outcomes for clients????? Write to your local member and voice your opinion don’t just sit there. Then next election make your vote count.
Agree with ALL current comments made, and add further the fact that I cannot understand the rationale of why the present minority held Labour Government, controlled by the Greens wants to reinvent a structure that sadly presently under insures the majority of the self-employed working population as it is at present anyway. These are the people who need the opportunity to be protected the most. Bill shorten and crew, you have missed your vocation, the clowns in Wirths circus need people like you. Your left wing puritan stance and attitude towards our current Australian way of life, makes me want to flee Australia, lose my identity and smuggle back in on a refugee boat and claim asylum.
It appears that I would obtain more support, handouts and sympathy this way.
Regarding the best way to overcome this dilemma is to simply have an inbuilt Fee for service box in the application, that forms part of the contractual premium paid by the insured, with various scales or levels, dependent on the overall advice and time involved in providing this service that the insurer rebates directly to the Adviser as a “FEE for service” not a commission for assisting the client in implementing the cover with that insurer. A scale of set fee’s could be nominated in varying formats.
Come on people, we are smarter then a drone, that has a limited life span, hovering around the queen bee.
I currently have 2 10 year plus claims which will run for at least another 20 years. I have never charged a cent for my intervention on my clients behalf every time a claims dept gets nasty.
The renewal commission on these claims over the years would not pay for two hours of work. I put in the hard yards on claims because I care about my clients. You don’t stay a risk adviser in the long term unless you have some level of care for your clients at claim time
EVERY life insurer has claims departments capable of being totally un-reasonable and making hasty and ill-judged decisions. EVERY claims department is capable of handing a stack of files of long term claimants over to a new whiz kid, who does not have a bone of humanity in their sole, with instructions to ” see if you can clean up that lot”.
Advisers, and in particular risk advisers who actually get involved in the claims, have to be on their guard constantly and read every piece of corrospondence from insurer to claimant
If advisers abandon this duty, or the client can’t, or won’t pay a fee because its always open-ended, who cares for the client.
Not the Govt-too busy tightening up on disability pensions. Not FOS, because its snowed under, and complaints on claims will increase. FOS will of course trot out statistics to the contrary, but I know of a income protection complaint that took 8 years for SOME result.
Not all advisers get involved in claims. Some rely on thier level of production with one or two insurers to ” heavy ” claims depts ( via the sales guys ) if needed.
What happens if that adviser sells his business and retires. Do you think that same insurer will still respect the purchasing adviser in the morning, particularly when the new adviser has “deals” elsewhere
If this version of FOFA gets up, level & hybrid commissions are dead.Insurers will play hardball even more so on claims where no adviser is involved. FOS will be clogged up and trying to operate in an efficiency divedend environment.
Our clients will be stuffed !
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