Do life insurers’ direct sales models breach remuneration rules?
It will be years before the Australian Securities and Investments Commission (ASIC) will know whether its changes to life insurance remuneration have actually been effective.
But it has signalled to a Parliamentary Committee that the major insurers providing life insurance via direct channels are now under scrutiny including the possibility that some of their business models could breach regulatory requirements.
ASIC has used documentation provided to the Parliamentary Joint Committee on Corporations and Financial Services review into the life insurance industry to acknowledge that because the Life Insurance Remuneration Act does not commence until 1 January 2018 it will not be able to determine whether the changes are “effective in achieving the objective of better aligning the interests of consumers with those selling the life insurance for a number of years”.
“The Government has asked ASIC to conduct a review of the reforms in 2021. We will be collecting data and conducting surveillances on advice, and have a current project on sales of life insurance through the direct channel – all this work will assist in establishing whether the reforms have been effective in achieving their objective,” the regulator said.
“Different models of distributing life insurance exist, especially in the direct channel, and we are continuing to assess different types of distribution methods through ASIC's current work on direct sales of life insurance,” it said.
ASIC said that as it worked through the information it was receiving about different models of distribution, it believed it might find models that came within the reforms, some that were not captured, “and some models that seek to circumvent the reforms”.
“As yet, we do not have enough information to make an assessment. We will continue to monitor the industry, and consider what, if any, action might be appropriate if we identify any issues,” the regulator said.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
