All commissions on any form of life insurance should be removed completely as their continued existence does not remove conflicts of interest or protect the best interests of consumer, two industry super fund bodies have claimed.<\/p>\n
In a joint-submission to the Future of Financial Advice \u2013 Post Implementation Review being conducted by Treasury, Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) called for the ban on up-front and trailing commissions for individual and group risk insurance within superannuation to be extended to cover all individual and group life insurance.<\/p>\n
The two groups stated the FoFA reforms were designed to align the interests of advisers with clients but \u201c\u2026it is difficult to see how this objective could be met under the current regulation, as the ban on up-front and trailing commissions and like payments for both individual and group risk insurance do not apply to all life insurance inside and outside superannuation\u201d.<\/p>\n
\u201cThe best interest obligation, in concept, accomplishes this goal, however its limited application to a portion of the financial services industry is unsound,\u201d the two groups stated in their recently released submission claiming the carve-out, and ongoing advice failures, undermined the credibility of the financial services system.<\/p>\n
\u201cBy failing to extend the ban of up-front commissions and trail commissions to all life insurance\u2026the industry has accepted that it will tolerate the provision of poor advice. This is akin to turning a blind eye to bad advice being provided,\u201d ISA and AIST stated.<\/p>\n
The two groups repeatedly quoted from ASIC Report 413 – Review of retail life insurance advice, released in October 2014, claiming it \u201cdispelled the myth that there were no problems in insurance advice and providing a damning report card on Australia\u2019s retail life insurance advice industry\u201d.<\/p>\n
\u201cCommission structures result in excessive churn of life insurance policies, with clients often recommended to change cover to attract the more generous level of commissions in the first year of cover,\u201d the submission stated.<\/p>\n
\u201cThere is no incentive to provide advice that does not result in a product sale or to provide advice to a client that they retain an existing policy unless the advice is to purchase additional covers or increase the sum insured.\u201d<\/p>\n
As part of the Review, Treasury is seeking submissions on a Consultation Paper which examines five measures that were enacted as part of FoFA reforms.<\/p>\n
These include the ban on up-front and trailing commissions on life insurance within superannuation as well as the requirement for advisers to have clients opt-in to ongoing advice fees every two years, the ban on soft dollar incentives, the limited carve-out for basic products from the ban on certain conflicted remuneration structures and best interests duty, and the clarification provided in relation to access to scaled financial advice.<\/p>\n","protected":false},"excerpt":{"rendered":"
All commissions on any form of life insurance should be removed completely as their continued existence does not remove conflicts of interest or protect the best interests of consumer, two industry super fund bodies have claimed.<\/p>\n","protected":false},"author":3,"featured_media":37636,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[282,8,270,5622],"tags":[4247],"class_list":{"0":"post-37612","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-associations","8":"category-compliance-regulation","9":"category-remuneration","10":"category-superannuation","11":"tag-feature"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/37612","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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=37612"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/37612\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/37636"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=37612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=37612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=37612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}