{"id":27678,"date":"2014-10-10T08:31:53","date_gmt":"2014-10-09T21:31:53","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=27678"},"modified":"2014-10-13T20:47:53","modified_gmt":"2014-10-13T09:47:53","slug":"we-dont-want-commissions-banned-asic","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2014\/10\/10\/we-dont-want-commissions-banned-asic\/","title":{"rendered":"We Don’t Want Commissions Banned – ASIC"},"content":{"rendered":"

Australian Securities and Investment Commission Deputy Chairman, Peter Kell<\/strong>, has told the insurance industry the regulator is not seeking to remove commissions for life insurance advice.<\/span><\/p>\n

<\/p>\n

\"ASIC<\/a>
ASIC Deputy Commissioner, Peter Kell<\/figcaption><\/figure>\n

Addressing the media following the release of ASIC\u2019s Life Insurance Advice Report, Mr Kell said that while the report had identified a link between upfront commissions and poor insurance advice, the regulator did not expect commissions to be banned.<\/p>\n

\u201cI\u2019d like to be clear: ASIC is not recommending or suggesting that commissions be prohibited,\u201d Mr Kell said. \u201cCommissions for life insurance are allowed under FoFA. They are part and parcel of the life insurance industry. But given that\u2019s the case, ASIC\u2019s message to the industry is clear: the industry needs to ensure that remuneration and incentive structures do not undermine good quality, compliant advice.<\/p>\n

\u201cWe found a positive correlation between high upfront commissions and non-compliant advice. The industry as a whole \u2013 insurers and advisers \u2013 needs to ensure that the interests of the client are more regularly prioritised as part of the way this sector operates.\u201d<\/p>\n

Mr Kell said that ASIC undertook the review for three main reasons:<\/p>\n

    \n
  • Life insurance is a very important product for Australian families<\/li>\n
  • We have consistently found, in our surveillance of financial advice firms, instances of poor quality advice around life insurance<\/li>\n
  • The industry itself has identified issues in relation to sustainability, remuneration structures and practices, and lapse rates<\/li>\n<\/ul>\n

    \u201cWe saw too many instances where the adviser did not consider the needs of the client, where consumers were recommended policies they could not afford and were of questionable value. There were too many instances where consumers were switched to a different policy without good reason. This failure rate is simply not good enough,\u201d he said.<\/p>\n

    The industry as a whole needs to ensure that the interests of the client are more regularly prioritised…<\/h6>\n

    Regarding the concerns some in the industry have expressed about the methodology used in determining which case files to review, Mr Kell said ASIC had taken a lot of care in selecting what it believed was a representative sample of advisers active in the sector.<\/p>\n

    \u201cWe focused on advisers who were active in the life insurance sector, who sold a fairly significant amount of life insurance,\u201d Mr Kell explained. \u201cWe spoke to insurers to help us identify those advisers. We didn\u2019t think that should bias that result one way or another, but that helped us to identify those who were active in the industry. I might note that we were recommended two advisers who we already had intelligence on as providing poor advice. We actually excluded those from the sample so there could be no suggestion that we were biased towards poor advice.\u201d<\/p>\n

    The regulator also excluded CBA\u2019s advice licensees, Macquarie Private Wealth and Professional Investment Services, who have all been subject to recent regulatory action.<\/p>\n

    When asked how ASIC could suggest the issues were \u2018industry wide\u2019 given the size of the sample of the review (79 advisers across nine licensees), Mr Kell said the licensees reflected a cross-section of the different types of firms operating in the sector \u2013 small, medium and large.<\/p>\n

    ASIC was unable to release any details of active investigations that had resulted from the findings in the report, but Mr Kell confirmed that some \u2018follow-up investigations\u2019 were underway.<\/p>\n

    \u201cWe will take enforcement action if necessary against either individual advisers or against licensees, if the conduct warrants that approach. But we are also sending a clear message to the industry that they need to collectively address this issue; to look at how current remuneration and incentive practices can be improved,\u201d Mr Kell said.<\/p>\n

    If industry do not show some initiative here there will be further enforcement and regulatory action<\/h6>\n

    He added that ASIC was already working with key industry associations to support them in addressing this issue. Mr Kell also noted that the report includes a checklist as to how to provide better quality advice, and how to identify potential risk factors that might lead licensees to deal with problems earlier.<\/p>\n

    \u201cWe\u2019re very committed to following through on these results in our engagement with the industry because I think it\u2019s in all of our interests to raise standards.<\/p>\n

    \u201cIf industry do not show some initiative here there will be further enforcement and regulatory action and there will be further reputational damage, and I think that industry leaders understand that that is unsustainable.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

    Australian Securities and Investment Commission Deputy Chairman, Peter Kell, has told the insurance industry the regulator is not seeking to remove commissions for life insurance advice.<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,270],"tags":[],"class_list":["post-27678","post","type-post","status-publish","format-standard","category-compliance-regulation","category-remuneration"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/27678","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=27678"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/27678\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=27678"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=27678"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=27678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}