An adviser interest group with more than six hundred members will continue to push for further changes to the Life Insurance Framework despite recent announcements from the Federal Government finalising the terms around commissions and clawbacks.
The Life Insurance Consumer Group (LICG) said it would be putting together its own proposal, which they feel highlights the unintended consequences of the current reforms, claiming they disadvantage consumers and small businesses without fixing the issue of improving advice outcomes for consumers.
They will also continue to speak with Government Members of Parliament to seek further changes around claw back and fixing commissions at 80% up front and 20% ongoing with a one-year clawback.
The group came to prominence recently after releasing the results of a survey which found there was a misrepresentation of advisers in the LIF discussions, with many advisers also stating there was no discernible consumer benefit in the changes.
Life Insurance Direct, chief executive, Russell Cain, speaking on behalf of the group, said the group remained concerned about the representation of independently owned advice licensees and small advice businesses in the discussions.
As such they would seek to state their case, particularly in light of the fact that the government has stated they are proceeding with the current proposal as it has been endorsed by the industry.
“We are concerned about how these groups were represented in the debate and we will still push for 80/20 and a one-year responsibility period, which we can show will not be to the detriment of consumers and small businesses,” Cain said.
“The conversation has changed many times in the past 12 months and this one has not ended and we will still work on ensuring the best consumer benefit.”
“The conversation has changed many times in the past 12 months and this one has not ended…”
Cain said the LICG was made up of advisers from both institutionally aligned and non-aligned licensees who believe that any reform should benefit consumers but felt that discussions around life insurance ‘lost the plot’ when it came to consumers.
“ASIC Report 413 cites clearly that there is an issue around product manufacturing while APRA has highlighted that issue as well back in 2013. ASIC also said lapse rates were related to product design but there has been a change in messaging and in the outcome which claims to benefit consumers but we are not seeing anything to prove that,” Cain said.
“We are still challenged by the remuneration structure and claw-back period because they will still impact on small businesses.”
Cain said the LICG would also start actively recruiting advisers to join the group and would release more details in the coming weeks about its structure, membership and future plans.
Good on you all for standing up.
It is interesting that with the FOFA changes the same issue was present. We were poorly represented. In December 2014 I was in a meeting with Nick Xenophon and another dozen advisers. Nick’s regretted his decision to support FOFA but said our industry was very poorly represented and there was a lot he was not aware of until our meeting. He even made the point he wanted some of us to speak to choice magazine as they had been brainwashed by industry funds. On top of this the AFA and FPA have enjoyed increase in membership due to a new mandatory requirement from most institutionally owned dealers making it a requirement for to be a member for authoristaion. The FPA then brags about how good it is but what does it actually achieve or even exist for that matter. If there were more advisers like Russell we could get some decent representation. Our business is still coping with the extra work load of FDS and Opt In (hard for a small business) not to mention the catch all provision which has encouraged solicitors to proactively market to consumers for litigation opportunities. In the future this will be a much bigger issue than the LIF changes. For me the FOFA issue is not done and dusted and I will keep petitioning Nick Xenophon to look at a less cumbersome and fairer FOFA framework. He stated at our meeting he would take it up with the treasurer but would not expect any action until after the next election. This is the email for Nick if anyone would like to add their voice regarding FOFA chnages: Diana.Babich@aph.gov.au
Interesting point re Choice having been brainwashed on FOFA.
When it comes to LIF, consumers will be much worse off. They will not pay the upfront cost of advice if it’s not built into a longer term product cost, and consequently will end up in “junk” products. Exactly where the FSC members want them.
So why isn’t Choice opposing LIF? If they actually think LIF will benefit consumers they are either completely brainwashed or completely brainless. The ASIC and Trowbridge reports highlighted the need for improvements in insurance advice. FOFA provided most of the solution via improved educational standards and best interests duty. The only element missing is removal of the conflicts associated with vertical integration. But instead, the life insurers concoct LIF to entrench vertical integration and drive more people into junk insurance. And because it involves adviser bashing, Choice and the media fall for it. Brainwashed or brainless?
Nick Xenophon knew very well about the FOFA details and supported it with his eyes wide open. I am shocked by your statement
The FPA & the AFA say the newly announced changes are a better outcome for advisers than what was first mooted ?
For whom ????
Here’s a good idea, every time one of your existing members leaves your association. you repay $1000 off your annual remuneration, and then tell us how you feel about that.
In other words, if 10 leave, then you pay back $10,000., if 100 leave, you repay back $100,000.
It doesn’t matter why they no longer remain on your books to contribute annual subs plus a $200 useless (where’s the tangible benefit to members) advertising levy !!
Pretty soon you’ll realise through no fault of your own, you’ll have worked the past year for virtually nothing and then you’ll get a sense of what it’s going to be like for many advisers.
Well done for this stance. It makes me sick that we are now getting emails from Insurance company execs saying how they agree that the clawback should be reduced from 3-2 years but at the same time (through the FSC) were fighting to see a worse outcome for advisers to increase their profits.
The FSC could not be more obvious in their attempts to kill the risk adviser world so that they can make more profit through bank aligned planners and dumbed down direct products. This is obviously a worse outcome for consumers but the FSC simply don’t care.
Our industry bodies have been an embarrassment and I don’t think the relationship between advisers and manufacturers will ever recover from this nor can we ever trust them again so I look forward to hearing more about how to get involved.
The question now needs to be asked “Do we have confidence in our associations to lead us in the next round of negotiations in 2018?”
The answer David is a resounding “NO”. Reality Check said it very well below with his comments on the FSC.
Disgraceful outcome, you wouldn’t want a few truths to get in the way of the insurance company profits and the FSC version of how to fix the problem. Lower premiums to clients, yeah right, this is really going to happen as insurance company after insurance company continue to increase their premium rates. This is all about greater profits for insurance companies.
The insurance adviser is being made a scapegoat for the industry’s problems and it is obvious that the plan is for us to all be operating on a fee for service insurance model in the near future post 2018. That is those that are left.
Perhaps the 600 members of the adviser interest group could create a new risk adviser association. Surely they could get a different outcome to the other associations who represent thousands of their members and especially after I just read that Kelly O’Dwyer has told a number of outlets that the current LIF is cafinal.
“That’s it. It’s all done and dusted now,” O’Dwyer said. That’s what I just read about the LIF.
I really doubt an adviser interest group with 600+ members could change that especially after the other associations representing thousands couldn’t with more time.
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