Limited advice canvassed for direct life/risk

29 July 2020

There should be some scope for insurers to provide some form of limited advice around the purchase of direct insurance products.

That was one of the bottom lines of a Financial Services Council Life Insurance Summit panel discussion with head of Swiss Re’s iptiQ, Bronwyn Kirwan pointing to the need for at least some advice around direct insurance products.

In doing so she pointed to the less than wholly successful efforts around limited advice in the United Kingdom and suggested that that outcome ought not preclude Australia considering doing the same.

Related News:

Kirwan was backed by lawyer, Michael Vrisakis who said he believed it should be possible to sell an annuity or trauma product under a limited advice, personal advice model.

“Whether that can operate in a call centre or high viable that will be will depend on how limited you can go, I think,” he said. “At the end of the day when you’ve got over-arching community expectations that’ll play a definite part.”

“I also believe in innovation in advice – a model where the product issuer might actually fund an advice allowance for the consumer who can then use that to pay the adviser,” Vrisakis said. “That model would actually be allowable under the conflicted remuneration model with any amount paid by the consumer actually an exception.”




Recommended for you

Author

Comments

Comments

This could work. However it should not be sold under general advice without the requirement to adhere to the Best Interests Duty. Companies such as Real Insurance and Insurance Line need to be disbanded or restricted to Life Insurance only as they are JUNK INSURANCE.

Realistically insurances should only be sold by third parties who have to ability to compare diffferent insurance products from a range of prividers who are obligated to work in the Best Interests of the client.

Just get rid of all the red tape. It is ridiculous that an insurance sales rep can sell his/her companie's policies without having to have any formal qualifications, ongoing CPD points, no need to do an SOA or adhere to the Best Interests Duty, when a financial adviser needs to be university qualified as well and has to adhere to all the above simply to increase the sum insured for one of their clients.

Best Interests Duty for all insurance sales!!!!!!!!!!!

Good to see those who caused the whole mess, ie the FSC, are trying to solve this mess with more of the same self interested thinking that started it. (eye roll) I love the part about the abject failure of this type of model in the UK, but that shouldn't stop us trying it here!! Please!! The FSC is the most conflicted body in the whole industry...and that's saying something.

I wish the FSC would give up. You and the institutions you represent have had their turn at trying to control the path the industry takes and look at how that has worked out for all involved.

Yes the FSC is the most inept self serving body in any industry. They should be disbanded. They (and the big money investment funds and banks they really represent) are responsible for problems in our industry

Looks like that the reality has finally dawned that hardly 3% of people need a full comprehensive, rather expensive compliant financial advice.
The majority require simple single financial product advice, whether it be in the field of life insurance, superannuation accumulation, superannuation retirement income.

The big bogeyman question is how those who provide this service are paid keeping in mind all of the above mentioned financial products require some level of ongoing monitoring and adjustment tweaking from time to time to meet the changing circumstances.

Judging by this week’s activities in the direct sales area, the FSC would have appear to have abandoned any pretence that it represents the interests of consumers. Direct sales of substandard life insurance products, without any obvious premium savings, are not in the best interests of life insurance consumers, particularly when sold by a well-coached call centre operator. That was the clear message from Hayne, but that doesn’t seem to have had any impact at the FSC, and judging by its recent in-actions, ASIC.
In response to pressure from some of its life insurance members who are suffering because of the imposition of LIF and FASEA on self-employed commissioned life risk advisers, the FSC seeks to re-engineer the debate about General Advice. Isn’t it funny how the FSC can go to the UK for support of their arguments on expanding General Advice when they ignore the recent experience in the UK that attacking life risk commissions only has one outcome – reduction in genuine new business.
Now the FSC is trying to dress up old mutton as new lamb. The General Advice system, the favourite of ASIC, is not the friend of life insurance consumers when its offered via direct sales from un-licenced operators. The General Advice regime will always be abused, because it’s human nature to find holes in the law if there is a commercial advantage. And the general advice system leaks like a colander.
The moment a caller to a life insurance call centre, or a caller responding to a marketing call from a life insurance call centre, asks, directly and independently of any “set-up” by the operator, “how much cover do you think I need” the sale has automatically tripped over into Personal Advice unless the operator refuses to answer in any form. Call centre operators, regardless of the approved ASIC script, may then often add “well other people have taken out this amount of cover”. That’s still Personal Advice. Don’t believe me, make the call!
It’s clear now from this week’s media that the FSC, unexpectedly, are attempting once again to game the General Advice system to get around Hayne
In the interest of all life insurers consumers, General Advice, and its numerous and poorly disguised derivatives, must be abandoned by ASIC. Or, alternatively, ASIC, for once in their lives, should take a commercial position on the sale of life insurance products and drastically reduce the compliance burden on Authorised Representatives who market insurance products on a Personal Advice basis.
Revisiting LIF and taking note of what happened in the UK and NZ might be a good start, but I won’t hold my breath

You are mostly correct. However there is no way to service 80% of customers under the full advice process for insurances only. There needs to be some mid ground. Such as it can be sold under limited advice which offers choice of products/providers and adheres to the best interests duty. Sales by tied agents need to be banned as this does not offer choice or act in the best interests of clients. GA for all insurance sales should be banned as soon as there is any human interaction.

I actually don't have a problem with tied agents/employees giving limited scope advice on their own product only... as long as there is a reasonable level of training, disclosure, and consumer protection required for that advice.

At the moment insurance and super fund employees are giving product recommendation advice anyway, under the General Advice exemption applying to product company employees. There is very little training, disclosure or consumer protection, and it is utter fraud to claim it is "General Advice". Consequently much of it is very bad advice, which is causing great consumer harm.

Unfortunately ASIC chooses to focus its resources on persecuting licensed advisers, rather than enforcing these clear and widespread breaches of the law which are causing far greater consumer harm.

Yeah ok, I agree that tied agents need to be able to sell their product, but why then are financial advisers complelled to adhere to Best Interests Duty and hours of training and costs and compliance to sell the same type of products, just tailored to their individual situation and with choice of products. I just think there needs to be a set of rules/education/training/compliance which apply to all people involved in the sales process for risk insurances.

Best Interests Duty is a must!!!!

Ive seen too many cases where a client has transferred their super and lost their existing insurances and are unable to claim for something they have paid all their lives for. It makes me angry that this can happen and there is nothing anyone can do about it as the client accepted the terms and signed all the declarations. We have to remember that the majority of people are unfamiliar with insurance contracts and dont know they will get exclusions with new auto acceptance policies. Limited advice (with BID) would be a good thing in this case.

This is why I'm not so sure the AFA and FPA joining the insurers in that new CALI group is a good idea.

The FSC are not supporters of advice. They are, at best, suppliers. And like any other supplier that forgets who their customer is, they are feeling the consequences of over-stepping the mark.

I'll never understand the eagerness with which this industry bends over backwards to accommodate the self-interested whims of our suppliers.

They're not our partners, they're not our friends, they're not our supporters, they're not comrades in the glorious struggle to bring insurance to the masses.

They're cold-blooded, mercenary companies focused on securing distribution for the product they're supplying (badly, incidentally - I struggle to think of a cartel of greater collective ineptitude in this country).

Which is fine.

But why do we advisers keep pretending otherwise?

Here is the FSC's real play. They join with the AFA and FPA to pretend they care about advice to clients, however what they really want is the same carve out the union funds have to provide personal advice under the guise of general or intrafund advice. When they get this they can push advisers out. That's what they really want. The FSC is a truly despicable organisation who pretends to care about clients, but in reality it's all about getting short cuts to flog their product directly to clients without the worry of BID.

Hang on.......
Bronwyn Kirwan is married to Nick Kirwan who is Senior Policy Manager of Life Insurance for the FSC.
What is driving this and is this appropriate ??

If retail Life Agents are allowed to get rid of Statements of Advice & Commission Disclosure, the FSC can do what they like. Retail advisers are being done over by the Instos, time after time. Enough is enough.

The FSC just need to be disbanded and insurers regulated directly. The FSC prove time and time again that they are just a self serving lobby group for profit and have no interest in consumer best interest. The LIF has failed everyone and the fault lies with the FSC. Their Life insurance code has failed and the fault lies with the FSC. They cannot be given another chance.

I am beginning to query whether a return to a model of individual insurers having their own in house advisers that only have access to that company's products would be more workable.
That way, the insurers could pick and choose the best of the best advisers to work with and the advisers would be given an exemption for the BID in relation to the recommendation or assessment of alternative products , but not in relation to still acting in the client's best interest regarding the assessment of their current cover, their objectives, needs, affordability etc.
The insurers would be responsible for regular, high level product training,technical strategy etc.
The advisers could be employees on a salary with a bonus structure based not on volume but on KPI's around client satisfaction and retention criteria as per similar bonuses paid to Retail and Industry Super fund advisers.
Single or multiple advice issues relating purely to risk insurance needs could be covered within an SOA following a full assessment of the client's risk insurance needs.
If the cost of that particular insurers products are not competitive with alternative insurers then the client can obviously then proceed to approach alternative options to assess and make a decision.
Advisers would then only be a representative of that one organisation and responsibility for the quality of advice would be the insurers responsibility.
Could this happen ???

No thanks. Here's the solution... Comms back to at least 80/20 and only advisers providing personal advice allowed to 'sell' insurance to clients, with less labour intensive advice process requirements i.e. no 80 page SOA's.

It amazes me how the proposed solution to the problem is special carve outs for selected groups. Do you think full advisors like doing this much work to help people? One rule for all. Fix it for all. It's that simple. We can't go backwards from here, where consumers can't understand the difference in the service they receive.

How could you possibly 'sell'an annuity without taking into account broader circumstances and passing the FASEA code. The lawyer qouted clearly has no idea of the playing field and is hired mouth of the FSC.

So the FSC are looking for a carveout, so they can flog their own products via call centres. Really, what is the point of Best interests duty, FASEA code of ethics, and other reform when they (FSC) just want to bypass everything for themselves. There is a distribution force of 20,000 qualified advisers who can do this, and adhere all the regulations if they provided some incentive (commission) and made some common sense compliance rules to make the delivery of advice more efficient.

Can I kill off the return to TIED AGENTS bit-please.

I wont go back . Pressure to sell certain insurance products regardless of client needs . Forced to sell the dreaded ün-bundled"investment products. Frowned on if one choose to invest the $3,000 super contribution in a super bond rather than the regular premium model with ridiculous commission, and 14% to the sales manager for SFA.

Constant tinkering with whole life bonuses. Agency agreements that changed without the need for your signature.Lack of commercial underwriting on non-standard insurance applications.Three year clawbacks.

And constant reminding you were just a serf in their bloody feudal system, not a businessman.

You must be joking!!!

I'll just leave this one below.... this is what you get when insurance is sold by phone or what they will try and push next Robo...

The father of a man with Down syndrome who was sold life insurance over the phone testifies
https://www.youtube.com/watch?v=YVNoHuprCJg&t=9s

General Advice Can work with appropriate consumer protections. Every time, I look at comments section of money management and IFA all I can see is constant shouting, and demonising of alternate form of advice. Whether that, be intrafund, general or digital advice. I can appreciate the challenges of being a self-employed financial advisor who have to face the reality of declining business revenue, uncontrollable expenses brought on by constant legislative tickerings and moral incompetency in certain section of industry. But that doesn't mean everyone is there to get you.
Significant majority of the industry has great appreciation for the work done by financial advisor who provide wholistic personal advice, as well as for those who provide personal risk advice. However, these solutions are not perfect fit for everyone. Each client is different, and regardless how much tailored your services may be, you are not able to meet the need of everyone. Hence, there has to be alternate form of advice which meets the needs of the wider market.

Yes, I agree general advice has been gamed by certain section of industry in past. In fact, individual who were truly looking to exploit the system, didn't provide any advice at all. No- Advice is not a viable long term solution. Even vegetable vendors have to express an opinion to describe the difference between Desiree potato & kipfler potato. This opinion has potential to impact buyers decision. In financial context, that is financial advice. Hence appropriate consumer protection has to be provided. So household are not sold kipfler potato, when consumers likely side dish for dinner is a mash.

Soon to be implemented, Design & Distribution obligation, coupled with New Anti-Hawking law & ASIC product intervention power are step in right directions. These legislation sets the right expectation amongst the wider industry participant. Everyone has an obligation, whether that be product manufacturer or advice provider/product distributor. An obligation to ensure that product does what it is supposed to do, the person buying the product knows what it is supposed to do, and whether it would be of use to someone in their circumstances. So, no more kipfler potatoes for mash connoisseurs.

However, this is not enough. General Advice advisers must be empowered to ensure they can speak up, when they notice system is not working. When they notice the person buying potatoes is blind and can't spot the difference between desiree and kiplfer. And this empowerment will only happen if they are held to the same standard as personal financial advisor. This means if you provide general financial product advice, you should have same level of educational qualification, similar training on ethical values & principle, and similar exam to test the competency. Courts have already established, in certain circumstances fiduciary duty applies equally to general advice and personal financial product advice. This is despite the statutory best interest duty not being applied on general financial product advice. By applying the exact same educational standard to general advice advisor, industry is not only ensuring better outcome for clients but also minimising risk to the business and in turn wider industry. There is no better advocate for personal financial product advice, then a general financial advice provider.

General advice isn't advice it is just product retention, shouldn't be called advice at all.... its just product information and in house product advice.

Add new comment