The Association of Financial Advisers (AFA) has announced it will hold a half-hour open forum at its 2015 National Practitioner Roadshow this month that will give advisers the opportunity to discuss their concerns about the proposed Life Insurance Framework (LIF).
AFA CEO, Brad Fox, acknowledged there continues to be uncertainty, confusion and concern around the detail and implications of the LIF, and that the open-style forum at the Roadshow is intended to provide all advisers with the opportunity to ask questions, share ideas and start to consider solutions that he says other advisers are already adopting.
We share a number of very valid concerns around clawback
At an adviser webinar held earlier this month, Mr Fox said the most contentious LIF issue raised by advisers related to the proposed three-year clawback provisions. “We share a number of very valid concerns around clawback and it is important for advisers to understand why it is in the framework and the negotiations behind it. The AFA National Roadshow will allow us to further discuss these concerns,” he said.
Mr Fox said the Framework released by the Government represents the biggest change to life insurance advice for many decades, and noted the concern and anxiety held by many advisers. “The open forum will sort the fact from the fiction and open the way for advisers to start thinking about how to manage the changes. This is an important opportunity for our members to take,” he said.
The AFA has also produced a Q&A-style response to ten frequently-asked questions by advisers in relation to the Life Insurance Framework. Click here to link through to the questions and responses.
In addition to the open forum at its National Practitioner Roadshow and its Q&A response package, riskinfo understands the AFA is looking to conduct another roadshow in the coming months that is dedicated to the issues surrounding the Life Insurance Framework. We will report further details as they are released.
As a reminder to advisers, these are the 14 proposals contained within the New Life Insurance Framework, as announced on 25 June:
- Maximum total upfront commission of 60 per cent of the premium in the first year of the policy, from 1 July 2018.
- Maximum ongoing commission of 20 per cent of the premium in all subsequent years from 1 January 2016.
- Three year retention (‘clawback’) period, to commence from 1 January 2016 to apply as follows:
- – in the first year of the policy, to 100 per cent of the commission on the first year’s premium;
- – in the second year of the policy, to 60 per cent of the commission on the first year’s premium;
- – in the third year of the policy, to 30 per cent of the commission on the first year’s premium.
- Ban on other volume-based payments from 1 July 2016, with appropriate grandfathering arrangements, consistent with the Future of Financial Advice laws.
- Life insurance companies to offer fee-for-service insurance products to support advisers who wish to operate on a fee-for-service basis.
- Maximum total upfront commission of 80 per cent of the premium in the first year of the policy from 1 January 2016.
- Maximum total upfront commission of 70 per cent of the premium in the first year of the policy from 1 July 2017.
- Maximum total upfront commission of 60 per cent of the premium in the first year of the policy from 1 July 2018.
- Government to consider measures to widen Approved Product Lists by 1 July 2016.
- Life Insurance Code of Conduct to be developed by the FSC by 1 July 2016. Similar to existing codes for Banking and General Insurance, the Code would set out best practice standards for insurers, including in relation to underwriting and claims management.
- Ongoing reporting by life insurance companies of policy replacement data to ASIC to commence 1 January 2016.
- Government to conduct a review of these measures by the end of 2018.
- ASIC to review Statements of Advice, with a view to making disclosure simpler and more effective.
- Government to consider developing a mechanism to rationalise life insurance legacy products, consistent with recommendation 43 of the Financial System Inquiry.
