Profit-sharing arrangements between insurance companies and some major superannuation funds have come under scrutiny by the Minister for Revenue and Financial Services, Kelly O’Dwyer and have been directed for the attention of the Productivity Commission (PC).
The profit-sharing arrangements have often been the subject of criticism by financial planners and O’Dwyer used a radio interview to question whether such arrangements were actually in the best interests of superannuation fund members.
Discussing the broad question of insurance within superannuation and the manner in which premiums could erode account balances, the minister said it all became a question of what was in the best interests of members and the industry needed to justify such arrangements.
“There are also arrangements where there are profit-share arrangements with a number of these funds as well, and again, the question is – are individual members actually getting the benefit of that or, in fact, is the fund itself getting the benefit and that not being passed on?” O’Dwyer said.
Her comments follow on from last year’s submissions to the Joint Parliamentary Committee reviewing the Life Insurance industry in which one major insurer pointed to the existence of the so-called profit-sharing arrangements but said it believed the rebates provided to the superannuation fund were then put to work for members.
Financial planners have argued that the profit-sharing rebates provided to superannuation funds, particularly industry funds, are similar to the volume rebates provided to dealer groups which were outlawed under the Future of Financial Advice (FOFA) changes.
Elsewhere in her discussion of insurance and superannuation, O’Dwyer spoke openly of the need for change in the superannuation sector claiming that while some people in the industry believed it was perfect and not in need of change, the truth was the industry might be doing better than the individuals it was meant to serve.