Industry funds inject life/risk commissions into super debate
Industry Super Australia (ISA) has sought to inject commissions paid to life/risk advisers into the Productivity Commission's (PC's) assessment of the competitiveness and efficiency of the superannuation industry.
At the same time as life/risk advisers are still coming to terms with changes to the remuneration structures forced by the imposition of the life insurance framework (LIF), the ISA has used its most recent submission to the PC to point to the impact of commissions paid to advisers, particularly where they were paid on a related party basis.
Dealing with the provision of insurance within superannuation, the ISA said it supported the PC's proposed indicators, however recommended two additional indicators including the impact of commissions.
"In assessing whether funds offer products that meet members' needs, it is important that the Commission considers the value and benefit of default insurance that is offered to members of a fund," the ISA submission said.
"This should enable comparison between sectors, as it is widely acknowledged that default insurance varies between sectors.
"In assessing whether the costs of insurance are being minimised, an indicator which assesses the impact of commissions in life insurance sales is relevant to this objective, particularly between related parties."
"We recommend that the commission includes an indicator which quantifies the level and incidence of commission payments in relation to life insurance in super. Commission structures do not just lead to biased advice, they 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."
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