Adviser Letter to PM


NSW adviser, Sam Perera, has released the content of a letter he sent to the Prime Minister, in which he considers the potential impact of the New Life Insurance Framework on tax payers, small business and Government.

NSW risk-focused adviser, Sam Perera
NSW risk-focused adviser, Sam Perera

Delivered via his local member, Social Services Minister, Scott Morrison, Mr Perera seeks to give perspective to some of the findings contained in ASIC’s 2014 Review of Retail Life Insurance Advice (ASIC Report 413). He also addresses what he sees as a lack of foundation on which the David Murray-led Financial System Inquiry recommended a level commission-only future remuneration regime.

Mr Perera, who is Founder his firm, Perera Crowther Financial Services, appeals to the Prime minister to consider what he says are a number of facts he believes were ignored in the development of the New Life Insurance Framework proposals:

Fact 1

…why are the other commission structures being meddled with if they are proven by the regulator to work?

ASIC Report 413 provides recent, empirical evidence that retail life insurance commissions are not always conflicted. Quality advice is provided to consumers 93% of the time when 2 of the 3 currently available commission structures (Hybrid and Level) are utilised by advisers. This is in spite of the fact that the report was targeted to find evidence of poor advice. Report 413 is the only evidenced based research available to formulate views regarding any reforms to retail life insurance remuneration.

It is ironic that this very report is being used to argue for the removal of commissions altogether on the basis of misaligned advice. The question remains, why are the other commission structures being meddled with if they are proven by the regulator to work?

Fact 2

If the above is ignored and the focus remains on the high Upfront commission model, (which ASIC postulates is a cause of poor advice), then no argument exists for reducing and capping servicing commissions (Year 2 onwards). As such, there is no reason to place restrictions on the ability of the market to determine the level of servicing commission paid to advisers to help service their clients over time and help manage their claims to resolution.

Fact 3

Only 33 Advice Related Life Insurance claims were accepted by FOS in the 2013/14 Financial Year. This represents a fraction of the overall claims heard in the area of Life Insurance at FOS (2.8%). There is no evidence to suggest that poor advice in the area of Life Insurance is pervasive.

Fact 4

Recent FOFA legislation enshrined a fiduciary duty in the Corporations Act to regulate the advice provided by advisers with accompanying powers for the regulator to ban or disqualify individuals providing poor advice.

Fact 5

[David] Murray’s FSI recommendation to move Life Insurance commissions to a Level Commission style was not evidence based, nor was industry consulted. Commissions in Life Insurance was a miniscule element of a vast and significant review which meant little consideration was given to the issue at hand.

Mr Perera goes on to speculate on the potential impact of the new remuneration proposals, based on a survey he conducted of 339 small business owners, which he says found that an unfair remuneration restructure will see close to 60 per cent or 200 small businesses shut down either completely or partially. “This will result in almost 1,000 job losses where the unemployment queue will be under further pressure. 13,000 years of combined experience will be wiped out, the same experience that has assisted over 15,000 clients and their families to claim on life and disability insurance policies,” said Mr Perera, who urged the Prime minister and his Cabinet to place the consumer and tax payer ‘front and centre’ in their decision-making process.


  1. Well done Sam, this is exactly the course of action the risk adviser community needs to pursue. The government needs to hear the truth about the Life Insurance industry rather than rely on untruths & misinformation being peddled by powerful vested interest groups.

    ASIC Report 413 is a deeply flawed document which should never have been used to support arguments being offered to promote reform. Consider the following –

    1. Of a potential 15,000 – 18,000 financial advisers in Australia, ASIC chose to review 202 files from just 79 advisers.

    2. The criteria for choosing those advisers? ASIC asked insurers to provide 3
    names of advisers with the highest number of new in-force premiums during 2012
    & 2013, who also had the highest number of lapses for the period. In other words ASIC ‘targeted surveillance’ was focused on – churners.

    Naturally if you review files of churners you’re going to be able to evidence poor advice & show a correlation between upfront commissions and that poor advice!

    This whole debate has been hijacked by the banks & insurers to achieve their own ends. Risk advisers need to find voice, not just in our own forums but with government, consumer groups, and the media (Fairfax – SMH/AFR/Aust have been pursuing this story). Failure to do so will confine the profession to history and cast the Australian consumer as the ultimate losers.

  2. Well said Sam. The points you have raised are very strong points integral to this debate and unfortunately Minister Frydenberg has overlooked these and given the banks the upper hand in these industry “negotiated” outcomes. The Liberal Party I am sure would benefit from understanding these issues. Also the process which the Minister undertook to reach this outcome deserves greater scrutiny by the Liberal party and the wider industry. I.e. A gun to the Associations head. Minister Frydenberg has sided with the banks on this one to the detriment of the small business adviser. This is a significant decision that goes against the values of the Liberal Party. Get active advisers. Let Frydenberg and the Liberal Party know. Risk info can you share the document for advisers to use?

  3. spoton when will the authorities understand our industry. have we done any harm writing risk
    insurance perhaps they should ask families who have been financially protected that have been paid a claim they may not have had the cover had we not seen them. the 60% upfront is uneconomicle for us to write risk after all the costs have been increased by government regulation with the SOA

    • Perhaps they should reveal the statistics for unsuccessful claims via direct insurance products of lessor quality…. I have know of at least 2 in the past year, from people I dont even know, just from comments I saw on someones facebook page(s). I imagine that this is just the tip of the iceburg… These people need cover, yet now they will be pushed down the direct insurance route, to the benefit of who? not the consumer, but the big, cumbersome and inefficient Life insurance companies. Shouldnt this represent a far larger problem (claims denial), rather then how an adviser gets paid?

  4. Tony doesn’t care, Hockey follows orders.

    We do not live under democracy that’s for sure. I doubt he will read the letter as these changes the Banks and Life Co’s wanted was agreed upon long ago, all this Throwbridge reports and fcis reports and all this BS was a stage show……

  5. I’m hopeful but my feeling is that our feedback to politicians count for nothing. I recall meeting with Nick Xenophon late last year to discuss FOFA, issues surrounding FDS and Opt In among others, and it was breathtaking how little Nick knows about the financial planning industry.

    He had no idea how we get paid, how often we disclose remuneration during the course of the year, the financial planning process, existing compliance requirements, client relationships, and I could go on.

    And yet these uninformed politicians make decisions based on a whim that carry drastic consequences for the small business owner.

  6. Well done Sam. Important to be proactive not reactive. Will be important to contact the Minister for small business as well. The original ASIC report is deeply flawed.

  7. Congratulations Sam and thank you for doing what would have been a considerable amount of time and expense for you and your Business, putting your letter together and sending it on for all our benefit.

    I read extensively all the media and I can tell all Life risk advisers, that even though we do not seem to be getting a fair go, all the articles and comments made by advisers are being listened to and the more we fight, the message is being heard.

    The one area that we must all reject outright, is the 3 year clawback. There is to be no negotiation on this, as it is patently unfair and unworkable.

    Every adviser, you have a voice. Now is the time to speak up, or you will not be heard above the rabble from fools and self interest groups who do not care about the retail Life Industry and are hell bent on destroying it.

  8. My gut feeling watching this sideshow is the Gov’t really wants to totally remove commissions in all shapes and form from risk as well as investments. This would mean that any insurance advice would be purely fee-for-advice only, that way there would never be commission write-backs if there was never a commission paid.

    Given that potential environment the real question is will many clients be prepared to pay for the work involved in making recommendations, presenting and massaging a case through the possibly arduous underwriting process before being accepted?

    I feel the eventual outcome of this push will see a reduction in the rate of insurance uptake in the years ahead with serious questions being asked as to why! And guess who will get the blame for that scenario? Yes, the advisers – for failing in their duty….

  9. How can this guys raise so many important and relevant issues, yet the AFA & FPA have said nothing…. their representation of this industry must be questioned, and in particular their funding from product makers. They dont mind doing a deal with the Devil do they!?!

  10. Congrats Sam.
    All advisers should be contacting their local members in some form or another to educate them about what we do and the real effects these changes will have on our clients.

  11. Jeremy says we are being heard and trust he is correct However I have grave concerns that any of these comments are ever taken on board by the people that have the power to alter and make decisions.
    The AFA and FPA monitor our comments closely that I am sure of but why were that not taken seriously. We all need to continue to lobby for change and good on Sam for what he has done. We should all try and follow a similar path with our own local members give them these facts and figures to produce in parliament. Don’t worry about the AFA or FPA they are already consigned to the fact that this is “The way it is” and that’s that.

  12. Well done Sam. I am from NZ and have been watching with interest the antics on your side of the ditch as the NZ regulator is bound to follow Australia’s lead.

    I agree with Paul’s comments when he says the the banks and insurers agreed some time ago to the changes. You can almost guarantee that they have been beavering away behind the scene to add fuel to the fire.

    I also read with interest that $4.9 billion was paid out in claims in Australia in 2014. This would not have happened without the good work of most advisers. At $20m per working day this is an enormous amount to protect the welfare of Australian families and businesses.

    Keep up the good work.

  13. Could not agree more with Paul or with CPW’s comments, who does represent us FPA? I pay my trailing commission every year to them or should I say Service Advice Fee ? Makes me sick that it takes someone like Paul to stand up with some substance !! Check out who the FPA “sponsers” are, hint “from little things, big things grow….” every Sunday night.

  14. My primary focus is to ensure clients have the cover they need which means premiums are frequently discounted to ensure the cover is affordable in the longer term. Experience shows if cover is affordable, and the client sees value in both the advice and the cover, the product is more likely to be retained.

    Providing discounts reduces the comm payable and I always elect hybrid comm…it ensures clients needs and practice longevity are aligned.

    It’s interesting to note how few advisers were targeted in the review and how they don’t appear to represent the industry as a whole. Mr Murray might have run a bank, that doesn’t mean he understands what it takes to provide advice.

  15. I have a feeling that all of our comments are what sometimes is put more crudely than ‘urinating into the wind’.

    Few politicians and regulators have any idea what it takes to be a life-risk adviser and what’s more they don’t take the time to do so. It seems that most people in Parliament don’t have any real concern for their constituents.

    So we’re on the horns of a dilemma. We can: a) adapt and get used to lesser incomes with no let-up in compliance; b) work out a fee-for-service formula (there appears to be a ‘whatever the market will stand’ opportunity in this) which will allow us to continue in business; or c) sell our book of business (this option might have to be soon to get the best value).

    What this will mean for mums & dads who need coverage but are limited in capacity to meet premiums is anybody’s guess. I don’t believe it will fix the problem of under-insurance in our country though.

  16. Sam well put together.

    Let’s hope the politicians are listening. The new proposed measures if followed will only have a downside for the Liberal Party losing support from Life Advisers ,small business and clients.

    So far Josh Freydenberg has mainly been listening to people who do not produce the business.

    Keep up the good work.

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