Advisers have raised objections to the impending cessation of insurance commission payments applying to a set of policies written through BT Financial Group.
The key issue, which has caused significant confusion among some advisers, relates to what advisers believe were individually-underwritten personal life insurance policies. These policies were BT Life Protection Plans that were written through BT SuperWrap prior to 22 June 2012.
What appears to have occurred – without advisers having been pro-actively notified – is that these policies, while written individually, were implemented under a group insurance basis; not as individual contracts.
Because the policies were implemented as group insurance, they have become subject to the Ending Grandfathered Conflicted Remuneration Act 2019, which was passed following recommendations contained in the final report of the Banking Royal Commission. Under this legislation, payment of grandfathered group superannuation life insurance commissions (not originally included in the 2012 Future of Financial Advice legislation reforms) will cease from 1 January 2021, with the amount of commission rebated in future to the client’s superannuation account by way of lower premiums.
Advisers …believe they had written these contracts as individual policies
Advisers who have spoken to Riskinfo aren’t disputing or objecting to the validity of the 2019 legislation, but rather to the fact they believe they had written these contracts as individual policies and were not notified the policies were implemented as group insurance.
BT’s Head of Adviser Distribution, Life Insurance, Steve Craig, has acknowledged in a statement that BT Life Protection Plans cover offered in BT SuperWrap with a risk commencement Date before 22 June 2012 were individually underwritten but offered under a group contract.
Craig adds that cover written under these products was originally provided by another insurer under a group life policy structure. However, when Westpac Life Insurance Services was asked to take over as insurer for these products in September 2007, the Trustee requested WLIS to take over as insurer under the existing arrangements.
Craig emphasises that the Future of Financial Advice legislation relating to commissions had not been foreseen at the time Westpac Life Insurance Services became the insurer and that the impact of the legislation on the group insurance structure applying to these contracts was not considered when the structure was adopted.
From the adviser perspective there have been two main issues, namely that:
- They appear not to have been advised the individually-written business was implemented under a group insurance basis
- The relative lack of notice they say they have received from BT has given them little time to address and manage any issues in relation to their servicing relationship with their impacted clients, where their renewal commissions have, until now, funded the annual cost of servicing these clients
“We acknowledge advisers are extremely busy and facing a great deal of change in running their practices, particularly at this time,” notes Craig, “…and we would have preferred to be in a position to provide more notice around the details of impacted policies ahead of this change.”
Craig adds that his team at BT will continue to be available to assist advisers, on request, with additional information and support to help manage this change.
I’m very sorry that this happens to any adviser group. As an AMPFP planner I, with many others, experienced exactly the same issue earlier this year and have had the commissions from ‘advised and underwritten’ insurances in so called ‘group policies’ i.e.the Flexible Lifetime range turned off at great cost.
I wish you the best in your efforts to avoid this but do NOT set your expectations high, just review as many clients as possible now to ensure they’re in the right place and if they are, try to reset with an ongoing fee commensurate to your service. The other thing NOT to expect is any reduction in cost to the client so make sure you don’t suggest that this may happen
Cheers .. ‘once burnt, twice shy’ 🙂
The commission will disappear but the fee structure will at the very best remain constant { not reduced } and when the ‘who ha” of this goes away they will go up.
Always seems to be the way ?
Thank for the clarity in the article as it covered the facts succinctly. The part that is glossed over or not acknowledged well by BT here is – when did they know of the effect of this change and that these policies had been inadvertently caught in the legislation?, and when they realised why they didn’t consult with their ‘partners/clients’ the advisers affected around a possible solution?
BT will stick to the ‘we are acting in accordance with the legislation’ story but with all of us subject to working to new standards and ‘codes’ does it make their action right? Not in my book – like in any client relationship once the trust is broken it is very hard to repair – perhaps they should try and stand in the advisers shoes and look at it from their perspective!
Very poor management from BT and its trustees. Advisers caught by an administrative mess caused by BT internal processes and no prior warning even though BT have had more than twelve months to investigate the situation and provide direction. The response in the above is feeble at best and largely indifferent.
Given the mess BT have caused they should be offering to assist in an abbreviated process to move these clients to retail, where they should be. The pricing and certainty is what Retail clients need.
More concerning is the fact these clients were written under group, where the trustee can renegotiate the terms with no notice as opposed to retail products who have to commit to their PDS. Fundamentally Advisers have been misled and their clients exposed to risks that weren’t disclosed by the Trustees or the BT sales teams. The trustees are responsible for this subterfuge and should be held accountable by APRA. This is not what the clients signed up for.
BT may well be following the CBA lead and no longer supportive of the IFA market. The good news is there are new entrants that are.
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