Reforming the life insurance industry is among the Financial Services Council’s key priorities for 2015, as outlined by new CEO, Sally Loane.
Delivering her maiden speech at an event in Sydney last week, Ms Sloane said the FSC was currently leading reforms in the life insurance sector, and that the association was prepared to act on the issues raised by the Australian Securities and Investments Commission (ASIC) in its review of retail life insurance advice.
“The FSC and the Association of Financial Advisers set up a process to review the ASIC report and present durable solutions to the issues raised,” Ms Loane said.
“One thing is certain – the status quo is not an option.”
Ms Loane said the FSC would also be focused on the long-term sustainability of the life insurance industry. She noted that a stable life insurance sector would be critical in addressing the issues likely to be raised in the Government’s upcoming Intergenerational Report, and to reduce Commonwealth budget pressure arising from disability-related welfare costs.
One thing is certain – the status quo is not an option
“Just as superannuation is the private sector solution to the costs of an ageing population and private health insurance is a private sector solution to managing health care costs, so too life insurance can be the private sector solution to the increasing budget costs of welfare,” Ms Loane said.
The new CEO concluded her speech by addressing the topic of financial advice. She said the FSC supported reforms which will deliver higher standards for financial advisers and the advice sector.
“There is bipartisan support for the ASIC register, national exams, university degrees and an adherence to a code of ethics,” Ms Loane noted. “The bar is being raised.
“The sector will evolve into a profession – as it must.”
The FSC will host its annual life insurance conference later this month, including a presentation from Life Insurance Advice Working Group Chair, John Trowbridge. Click here for more information.
This is yet another scrutiny of our industry. One area which doesn’t seem to have received the same airtime as others is the concept of making a minimum 3-year responsibility period for a life-risk insurance policy to be held. It used to be like that in the ‘olden days’.
When a new recruit came into the (tied) arrangement with a life office he had to report on any likely case. If the ‘x’ no. of points on the report indicated that the policy would likely fall off the books, the case had to be approved by the local life office manager, otherwise the new agent couldn’t write it.
It’s different world now, but that arrangement might allow advisers to keep upfront commissions necessary for many, if not most, to stay in business and to maintain viability for the life offices. It would rule out potential tyre-kickers, the ones driving lapse rates up.
Anyone hear the bleating of sheep. Mutton being tarted up as lamb. Who was it that said there is no-one so righteous as the converted sinner
The problem with the FSC is it represents the Big End of Town, whose only function is to increase profits. That fact that the banks control the FSC means the concentration on profits is desperately short in it’s focus-the shareholder must be kept happy- NOW !
If the new CEO is genuine, then she should establish a forum of non-aligned experienced risk writers to tell her exactly how the behaviour on Insurers and their lack of moral judgment in the pursuit of market share is directly responsible for the perceived sins of advisers.
She might also acquire some guts and confess the artificially contrived pressure on first year commissions is a direct result of the profits lost by the irresponsible frolics by insurers into the Group Insurance trap of cheap insurance without underwriting for ISA Super Funds.
Mutton spun as lamb might fly, but pigs don’t
Well said Bill. It’s funny how people who have been around for a while can see things as plain as day, yet all of these self-righteous groups with their own vested interests can’t stop bleating on about how things need to change. Life companies have been carrying on for years (& years) about the expensive costs to distribute their policies, yet despite their continuing attempts to undermine the advisers through alternate distribution channels the cheapest form of the distribution of products has still been to pay commission as a product is taken out. Obviously there is going to be a change, if we are forced into level commissions and our ongoings commence to grow I wonder how long it will be before various groups or organisations with their own self interests determine how unconscionable it is for us advisers to be earning such significant remuneration for servicing our clients.
The bar needs to be raised across the entire sector, which includes how the Life Industry is effectively managed.
The only way this can be done, is to ask for advice from specialists who know all the intricacies of the Life Insurance area, instead of listening to people who do not understand, have little or no experiance, or to take advice from self interest groups whose agenda is to feather their own nests at the expense of the Industry and clients.
The first step to solving our clients concerns and needs around their personal and Business Life Insurance requirements, is to listen to them and gather relevant data via a fact find that will enable us to provide a best interest solution, after analysing all the information.
That is the standard we must adhere to and yet it seems all and sundry talk about what they believe is necessary to fix the woes of the Life Industry, without first getting accurate information themselves, or backing up their statements with clearly visible data that can be put up to the spotlight.
@ Jeremy, I couldn’t agree more. Life insurance specialists should be the only people who can give advice when it comes to selling life insurance products. Too often ‘generalist’ financial planners get involved and sometimes they don’t fully understand the products they’re selling. One I spoke with didn’t understand what an AAL was. Life insurance should only be sold by dedicated and accredited life insurance advisers.
Been in this business for 30 years. What’s an AAL, Jacquie?
Well said BillB.
For too long it (focus) has been all about the adviser, what about the real drivers of the current mess?
The banks and the insurance companies.
If real reform is on the agenda, then we need to look at new laws like media ownership, own a bank OR an insurance company , but not both.
Like that’s ever going to happen …….sigh !
Would like to know her background and motivations. As the FSC is bank controlled and focussed the big end of town I struggle to believe her good intentions with reform being based on a extremely small sample report being done by Asic which is also questionably skewed towards getting an outcome that is predetermined and supports a certain view rather than being used to support understanding.
Spot on Les Hayward. You understand the real agenda.
The only ones that say that there is a problem in the Life Insurance Industry are the Life Companies/Banks, ASIC & the Industry Funds. All three have their own agendas . For the life companies its profits$$. For ASIC, its to show how mighty and proactive they are because of the flaws in the investment product failures. As for the Industry Funds, their agenda is quite simple! Its about getting rid of the Financial Advising Industry as it is today to improve their market share!
And how do these 3 bodies bring about change to suit themselves? By using the politicians to bring about their dirty changes in addition to using the media to provide the public with misinformation on just how many so called crooks are in the Financial Planning Industry! Shame on you all!
P.S I changed someone’s life last week by having a TPD claim approved and paid out for $850,000. Its my 25th claim in 48 months! How many of these stories are used to tell the public, via the media, about how much we make a difference to people lives in a positive way!
Sally Loan speaks for the insurers, she doesn’t speak for advisers. Probably doesn’t even know we exist!
Couldn’t agree more Jzee.
I asked the same question following Wish-Wilson’s recent article – are the advisers’ comments getting back to these people – in this case, Ms Loane?
Risk Info is asking for Adviser Comments – are you passing them on or can you pass them on?
Les Hayward got it pretty much right. The Insurances Companies want to pass on the responsibility of advisers collecting fees from consumers in lieu of upfront commission being paid by them for advice given. Do not know Ms Loane but question her motives and perhaps her real knowledge of our industry. Most of the current problems have been contributed by banks and insurance companies fighting for increased market share at the expense of the consumer and producing unprofitable books of business.
I note you did not print my comments or my reply to Les Hayward endorsing his comments.
Did I hit a nerve?
I’m curious, does anyone know how qualified a mortgage broker has to be to write Life risk insurance for Allianze … a general insurance company.
Do they have to complete a fact find ?
Do they need to be educated to give advice ?
Do they have to produce an SOA ?
Do they have to disclose all fees/ commissions … both up front and ongoing ?
The answer to all these questions is “NO”…. so why does anyone think there’s a problem in the life insurance industry.
The starting point would be to get rid of those singing ‘home home on the range “
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