PPS Mutual CEO, Michael Pillemer, is highlighting issues around conflicts of interest as the basis for his call for the Australian life insurance sector to return to a mutual insurance structure.
In a recent article released by Riskinfo (see: When Life Insurance and Banking Don’t Always Mix…), Pillemer reflects on the history of Australia’s life insurance sector since the 1990s, which has witnessed the evolution and subsequent demise of the ‘bancassurance’ model.
While he makes the point about the issues associated with the vertical integration model of life company ownership linked with ownership of distribution, he says the bigger issue – the issue which more significantly impacts the reputation of the sector and the level of community trust – can be traced to what he refers to as the “…age-old conflict between the interests of shareholders versus customers.”
Pillemer’s argument for a realignment of the sector also includes distribution structures. He suggests the big four banks lacked understanding and were complacent when it came to life insurance distribution, and he therefore supports the divestment by the banks of their distribution arms in recent times.
…a renewal of purpose aligned around the best interest of the consumer is underway
In calling for and bearing witness to the divestment by banks of their wealth and distribution businesses, Pillemer suggests that “…a renewal of purpose aligned around the best interest of the consumer is underway” – a renewal he says will deliver a more sustainable outcome both for industry and the human beings it serves.
Pillemer cites the following factors in support of his argument that a client-centric customer care model works better under a mutual insurance structure than it does under a shareholder model and its inherent conflicts of interest. He says that under a mutual model, there is:
- No return on equity pressure
- No shareholder dividends
- No short-term sales targets to meet the next quarterly return
- No subsidised advice models to uphold
Pillemer advocates that a mutual insurance structure will deliver appropriate products, services or professional counsel that aligns with the very best interest of one master – the consumer.
Click here to read the full article written by Michael Pillemer.