FSC’s LIF approach dubbed ‘cartel’ behaviour
The Financial Services Council (FSC) engaged in cartel behaviour when creating the Life Insurance Framework (LIF) as it was driven by the big banks and insurance companies, and the industry should have gone to the Australian Competition and Consumer Commission (ACCC) with the proposition.
Such was the argument by risk adviser group, the Life Insurance Customer Group (LICG), which said the FSC chose to force the LIF reforms through with scrappy legislation possibly because they did not believe they could satisfy ACCC scrutiny.
"If the FSC believes their own rhetoric about ‘churn' and ‘significant consumer benefits', and has sufficient evidence to substantiate their claims, why not go to the ACCC?" the group asked.
"Had industry gone to the ACCC with a proposition that could provide a better outcome for consumers, despite the negative impact on some industry stakeholders, such reforms could have been implemented a year ago?"
While cartel behaviour was illegal in Australia like price fixing, the ACCC could approve it if the benefits to consumers can be proved.
"Like restricting a competitive market by having all insurers reduce their otherwise varied pay rates to the same rate, at the same time on the same day. And all insurers implementing a common clawback arrangement on the same day at the same time," the group said.
The group, which includes Bombora Advice managing director, Wayne Handley, said the life insurance industry was sitting in expensive limbo as "common-sense, consumer-focused resistance" to poorly designed reforms had halted the passage of the LIF legislation through Parliament.
"The FSC has no data on which to justify their position, no rationale behind reducing remuneration to their recommended level, and no one has been able to specify one single benefit to consumers," the group said.
"There is no evidence of ‘churn'. No one has even defined ‘churn'."
Insurers paid $7 billion in claims last year, according to the Risk Store, and the group added clients needed advisers to help them get appropriate cover.
"These ‘reforms' do not address that, they threaten it," they said.
Recommended for you
Proposed legislative changes to safe harbour duty could result in advisers having reduced professional indemnity costs, a joint submission by seven major licensees said.
With 66 per cent of newly established advice licensees being sole advisers, what are the risks and legal ramifications to consider when taking the plunge into self-licensing?
Despite its popularity, only 1 per cent of financial advisers say they have often discussed cryptocurrency with clients, CoreData said, fuelled by concerns of heavy legal expenses if the product goes wrong.
AFCA and the CSLR have signed a memorandum of understanding as to how they will support an efficient financial services sector via the scheme.
