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The major issue is that none of the individuals who are responsible for setting policy around insurance commissions etc have any depth of understanding of the advice process and the complex nature of " getting it right " for the clients financial well being when or if a claim arises.
The responsibility placed on risk advisers to ensure the very best possible outcome for the client when they need the insurance to pay is serious and it is of paramount importance.
A good adviser and good advice strategy can assist in limiting the potential for a poor or substandard outcome.
The vast majority of advisers really care about their clients well being and their client place an enormous level of trust and confidentiality in that relationship.
There is a major divide in this country between what advisers really do and the perception of the legislators and influencers that insurance is just another commodity like bread and milk.
The commodification of the insurance space has set the tone that Life Insurance and other forms of risk insurance is just simple, easy and quick.
Simple , easy and quick invariably results in the purchase of a product that either may be substandard, inferior or full of surprises at claim time.
Whilst the adviser process does not have to be long, slow and complicated either, the advisers role is usually crucial to the best client outcome.
The ASIC 413 Report determined that when the then Hybrid model of charging commission at 80/20 was implemented, the advice success rate was 93% of the files assessed.
There was absolutely no evidence that supported the case that reducing commission levels to less than that model resulted in a higher advice success rate than the 93%.
The LIF outcome was based on no evidence that reducing the initial commission rates to 70% and then 60% would result in enhanced consumer advice outcomes, but was implemented anyway because of immense pressure from the Financial Services Council and Kelly O'Dwyer's close relationship with them and her inability to clearly understand the best method of providing insurance advice in combination with appropriate remuneration for those giving the advice.
It is now even more concerning that Kenneth Hayne appears to have even less appreciation for the often lengthy and detailed process advisers are subject to when providing high quality and compliant insurance advice in their clients best interest.
The LIF should be scrapped and the original Hybrid model be re-instated as the preferred model which will work best for all concerned.
Managing policy churn by any advisers is easy and this responsibility should be the insurers and the licensee.
Repeat offenders would be limited to Level commission only and if the practice continues, the business would be rejected by all insurers based on an industry wide Memorandum of Understanding signed off by all Life Insurance companies.