The Federal Government will give the life insurance sector three years to get its house in order or will move to either a level commission model or extend the conflicted remuneration features of the Future of Financial Advice (FOFA) legislation to cover life insurance as well.
Responding to the Financial System Inquiry (FSI) Final Report today the Federal Government stated it would adopt a different model than the level commissions suggested by the FSI and would support the implementation of the Life Insurance Framework (LIF).
The response, which was co-signed by Federal Treasurer Scott Morrison and Assistant Treasurer Kelly O’Dwyer, stated the Government had already developed “measures to address the misalignment of incentives in life insurance”.
The response agreed “more can be done to better align the interests of financial firms and consumers” but the Government’s response would differ from the FSI and “support the retail life insurance industry’s proposed reforms” announced in June by then Assistant Treasurer Josh Frydenberg.
The Government also gave an indication of how LIF would be implemented stating it “will consider the extent to which legislation and/or action by ASIC may be necessary to implement the industry agreement” but did not comment on the start date, which is 10 weeks away.
The response also indicates that LIF will have the proposed three-year transition period to take affect but will be reviewed in 2018 and any further reforms may fall back on the FSI recommendation or current legislation within the FOFA framework.
“A Government review in 2018 will consider whether the new industry arrangements for life insurance advice have better aligned the interests of firms and consumers,” the response paper stated.
“If the review suggests further reform, consideration would be given to the Inquiry’s recommendation for a level commission structure or further extending the existing Future of Financial Advice provisions on conflicted remuneration to life insurance advice.”
Click here to read the Government’s complete response to the Financial System Inquiry.
Interesting has the Government changed the constitution? it is not legal for them to interfere in this manner, would Gerry Harvey put with he is only aloud to make $5 each and every item he sells? would Woolies or Coles put up with the Government dictating to them a margin or inform the veggie growers it they wil take of 50% reduction in the margins they have in the best interest of the consumer, Ha ham we in the life insurance industry must be the laughing stock of the world, I only hope when Mr Turnbull has a life product claim it is denied because of deliberate non disclosure.
Ok everyone writes level commission. Great for the insurance companies disaster for the consumer. Why is an adviser going to move an existing policy already on level commission to another, when it will actually cost the adviser money to do so. So its just set and forget Terrific!!!!! What happened to clients best interest. The legislators have no idea and neither do our representatives.
John I expect the legislators to have no idea its the betrayl of the AFA and FPA which I am struggling with. They have sold the advisers business model out to the big banks and insurers in return for a piece of being a rentier with them by compulsory membership in future years.
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