The Life Insurance Customer Group (LICG) has questioned why life insurance reforms had to proceed through Parliament claiming that any real concerns around churn could have been dealt with by the Australian Competition and Consumer Commission (ACCC).
In making the claim the LICG also stated the Financial Services Council (FSC), which has defended the reforms, pushed for a legislative outcome to avoid scrutiny of cartel behaviour.
In a statement released to media, the LICG pointed to the FSC’s Trowbridge submission claiming it stated that life insurance reform legislation could by-pass the ACCC which restricted cartel behaviour and price fixing unless a greater public interest could be proven.
“If everyone agrees, and the claims for benefits can be substantiated, the ACCC can approve what would otherwise be deemed price fixing,” the LICG stated.
“Like restricting a competitive market by having all insurers reduce their otherwise varied pay rates to the same rate, at the same time on the same day. And all insurers implementing a common claw-back arrangement on the same day at the same time.”
The LICG also asked why the FSC had not already gone to the ACCC if it believed its own statements about churning in the life insurance sector and the benefits of changing adviser remuneration and had sufficient evidence to back up those claims.
“The LICG argue that the FSC opted to hastily force the LIF ‘reforms’ through with messy legislation because, perhaps, they did not believe they could satisfy ACCC scrutiny,” the group stated.
“The FSC has no data on which to justify their position, no rationale behind reducing remuneration to their recommended level…”
“The FSC has no data on which to justify their position, no rationale behind reducing remuneration to their recommended level, and no one has been able to specify one single benefit to consumers. There is no evidence of ‘churn’. No-one has even defined ‘churn’.”
However, the LICG said a quick solution was possible but required an open and transparent approach to industry issues and the full disclosure of information used to form industry positions.
“We can fix this tomorrow and help save Australia’s future from the major and identified risk of consumer underinsurance if all stakeholders agree to use real data, considered, long term policy, and come to the table with respect, honesty and integrity,” the LICG stated.
“We ask the FSC – are you willing to come to the table with a range of representatives, on those terms, to get some certainty for all stakeholders in this great, and once united, industry?”