The Financial Planning Association (FPA) has called on the Federal Government to reconsider its proposed ban on life insurance commissions within superannuation, saying it was concerned by a ‘double standard’ apparent in this proposal.
The FPA had questioned why different rules would apply to the treatment of commissions paid by life and general insurance companies.
Chief executive officer, Mark Rantall (pictured), said this apparent double standard has created additional confusion, compounding “the already confusing treatment of insurance purchased inside and outside of an individual’s superannuation”.
“Such awkward policy inconsistencies create a potentially damaging double standard that will ultimately impact the quality and cost of insurance for all Australians,” Rantall said.
The FPA stated it was disappointed by an emerging uneven playing field created by the Future of Financial Advice (FOFA) reforms, noting general insurance commissions were permitted both inside and outside of super.
The association said there were three primary reasons for not supporting a ban on insurance commissions – the increase in underinsurance, the increase in the costs for those who want to take out life insurance and no demonstrated link between commission and poor insurance advice.
“The FPA believes changing risk products to a fee for service basis would make the cost of advice for life insurance too high for many consumers, resulting in further underinsurance,” Rantall said.
Speaking at a media roundtable, where the association explained its official stance in regards to FOFA, general manager policy and government regulations Dante de Gori said the FPA was against the ban in risk commissions “not because we support [them] but because there is currently no better alternative”.
