The Retention of Life Insurance Commissions
AFA News 30 October 2020. On 15 October 2020, in his session at the AFA Virtual Conference, Stephen Jones, Shadow Minister for Financial Services expressed a preference for the removal of all commissions, including life insurance commissions. He did make it clear that this was a preliminary view and that, as suggested by the Banking Royal Commission, they would wait to see the outcome of the ASIC 2021 review of life insurance advice. He also made it clear that the obligation rested with the financial services industry and the financial advice profession to prove why commissions should be retained. On that point, it is important to note that Commissioner Hayne did not recommend the removal of life insurance commissions, however, instead expressed a view that in the absence of a clear justification for retaining them, the cap should ultimately be reduced to zero.
Notwithstanding that, as a profession, we need to put our best foot forward when it comes to the ASIC 2021 review, and the job is in front of us to demonstrate why the choice to pay by commissions, delivers a better outcome for consumers.
This time around, the financial advice profession is united in their support for the retention of life insurance commissions, as are all the Life Insurers. For anyone who needs proof of that, watch the life insurer CEO panel held on 14 October 2020 at the AFA Virtual Conference, where Brett Clark, CEO of TAL made that plainly clear and in terms that we can all understand. There is a lot at stake for the life insurers, with the retail advice channel representing more than half of life insurance premiums.
Members wishing to watch the Shadow Minister or the CEO panel (and who have not previously registered for conference) can register for the on-demand conference content at a reduced rate by visiting the conference website here.
As explained by ASIC Senior Executive Leader Kate Metz, during the Regulator panel on 14 October 2020, the work has commenced on the ASIC 2021 review of life insurance advice. They are currently collecting client files from 2017 advice, that will form the benchmark with an assessment of advice quality prior to LIF. This will be supplemented by files from 2021 to be collected next year, which will illustrate the impact of the LIF reforms. ASIC will release their final report in 2022 and then leave it to the Government to make a decision on whether any further changes should be made. The next Federal election is due by the middle of 2022, so the views of the ALP are important, and we will prioritise working with them to demonstrate the importance of the retention of life insurance commissions. We already have much of this evidence, however, we will be united in our approach and clear on what needs to be done.
Members can also play a part in this exercise, including through talking to your local Federal Member of Parliament where they are with the ALP. In doing this, the objective is to demonstrate the consumer benefit in life insurance, the value that you deliver in your advice and the importance for clients to have a choice in how they pay for that advice.
There is a lot at stake, and any decision to further reduce life insurance commissions would have a devastating impact on under-insurance in Australia and the overall health of the life insurance market.
Please send any feedback to policy@email@example.com.
Issued 30.10.2020. AFA News