All industry parties involved with the negotiations around the Life Insurance Framework should begin implementing them for the benefit of consumers instead of discussing other possible outcomes according to Synchron director Don Trapnell.
Trapnell said while industry groups, particularly the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA), worked hard to change some provisions leading to last week’s announcements around clawback, further reshaping of the risk advice sector should be avoided.
He stated the amendments would not be satisfactory to everyone but they were “a significant improvement on the original” and should be adopted by all parties.
“Now that the Government has spoken, all parties – the AFA, the FPA and the Financial Services Council (FSC) – should embrace the changes and work towards meaningful outcomes for consumers,” he said.
At the same time Trapnell said that while the adviser associations were key players in the changes to clawback, the efforts of individual advisers were also critical.
“The pressure brought to bear on the Office of the Assistant Treasurer by the political action of individual advisers cannot be underestimated,” he said.
“Now that the Government has spoken, all parties…should embrace the changes and work towards meaningful outcomes for consumers.”
“We acknowledge the impact of the numerous advisers, both of Synchron and of other licensees, who contacted their local members and state senators, personally and via mail.”
“We believe it is through the efforts of these individuals that Ms O’Dwyer gained enough information to really understand the issues affecting advisers, their businesses and their clients.”
Trapnell views are at odds in part with a group of more than 600 hundred advisers who have rejected the recent amendments as the final outcome as well as the representation of advisers by the AFA and FPA.
However, Trapnell also rejected any further moves to a fee for service model for life insurance stating that overseas experience and current under-insurance levels both point to poorer outcomes for consumers and advisers.
Trapnell pointed to industry consultation conducted by the UK Government in 2007 around the banning of life insurance commissions which found a high impact on both life insurance sales and underinsurance, prompting it to abandon plans to ban commission on life insurance products.
“The FSC has also said it expects all advisers to move towards a fee-for-service model over time. As underinsurance is likely to be an ongoing problem, we believe a fee-for-service model could only result in poorer outcomes for consumers and for advisers,” Trapnell said.
He also stated that with the release of further details around the LIF model, including changes to maximum upfront commissions Synchron would be examining which insurers will be passing on the full commission and which would be passing on a reduced commission excluding policy fees and frequency loadings.
“Some life companies currently pay new business commissions on auto increases and we don’t see any impediment to this practice continuing. In fact, Synchron believes there should be greater pressure brought to bear on life companies to pay them.”