It is the major life insurance companies, not advisers, who control the industry and competition in the industry between these companies for sales constantly puts advisers in a difficult position, according to the Association of Independently Owned Financial Professionals (AIOFP).
In a submission to the Joint Parliamentary Committee Inquiry into the Life Insurance industry, the AIOFP has sought to make clear the degree to which it believes the dynamics of the life insurance industry is being driven by the insurers themselves.
“The quality, pricing and distribution of life products are controlled by the companies, not the advisers,” it said.
The commission culture is controlled, constructed and paid by the companies, not the advisers.”
The submission said that with exception of dealing directly with the advisers client, the companies controlled all other functions of the industry. It said that the competition between life insurers placed advisers in a difficult position as they had to advise their clients of other superior products in both cost and features.
“Companies that develop superior products and get support from the advisers acting in the best interests of their clients are happy, the companies who have the inferior products cancelled are unhappy,” the submission said.
“This dynamic is in constant flux but the advisers get blamed for ‘impropriety’ if they recommend clients consider a better product.”
It said this scenario applied whether the adviser worked on a commission or fee for service basis with the client.
“There are a minority of advisers who are genuine ‘churners’ but the companies know exactly who they are but still choose to deal with them when they are getting new business but complain when they are not on the receiving end,” the submission said.
“These ‘churning’ advisers should only ever be offered level commissions but the companies control this aspect not the advisers and in many cases one company is prepared to act whilst another is not.”
