The Financial Planning Association of Australia (FPA) is recommending another review of life insurance commission as the current proposal “leaves more questions than answers”.
The Conflicted Remuneration Paper, part of the Quality of Advice Review, proposed the outcomes of the Life Insurance Framework (LIF) review and included two ASIC life insurance advice file reviews and a life insurance data collection.
In its submission, the FPA said it was disappointed from a transparency perspective that this data had been excluded from the paper and recommended a further set of file reviews as it did not believe sufficient time had been allowed to consider the outcomes.
FPA chief executive, Sarah Abood, said: “The FPA does not believe enough time has been allowed to consider the outcomes of the ASIC file review or ASIC/APRA data gathering outcomes to properly assess the outcomes of the Life Insurance Framework review.
“Additionally given the other regulatory changes which have taken place during this period, more research and consideration of consumer outcomes in relation to life insurance cover is required. The FPA therefore recommends a standalone review is conducted, including more file reviews.”
It was also concerned about the affordability and accessibility of life insurance advice for younger clients and for broad claim management support as advisers were exiting the market. In 2021, the retail advised life insurance market was made up 53% of premiums paid to life insurers coming from the individual advised market and 37% from the group super market.
“Many FPA members have ceased providing life insurance advice to their clients at current commission rates as they do not remunerate the financial planner sufficiently. Current commission rates fail to adequately compensate planners for either the work required to advise and implement insurance recommendations.
“There is additionally ongoing risk in relation to providing continuing service and support for the client given the risk of complaints and legal action in the event of an issue occurring at the time of claim (i.e. the cover having lapsed, the cover no longer being at an appropriate level, or the claim occurring in a policy exclusion areas) through no fault of the planner.
“Given these risks, many members of the FPA have chosen to cease offering life insurance advice services to their clients and instead refer them to others or scope out risk from their advice. This can be seen in the APRA and NMG data on cover levels and new policies written.”
The FPA supported LIF didn’t they? it’s a bit rich for them to now jump on the anti LIF bandwagon after the damage has been done.
Too late FPA…. I don’t provide insurance advice any longer because it’s too risky from a compliance perspective. You couldn’t pay me 300% up front commissions. You were in bed with the FSC and yet had members screaming at you for change 5 years ago and you said the typical FPA line of “let’s wait and see”. I suggest you start listening to members and stop listening to AwareSuper and your mates at the FSC.
Good points. Hard to defend the FPA – it certainly appears Financial Planners have been poorly represented at best and hard to see how the end result of QAR will be good for retail Australian’s who can’t afford a Professional Planner (Dr) – they are being sent to get good advice from the product provider (ie Drug Company). Well done FPA I guess.
The FPA has been a fabulous recruiting ground for large institutions.
Finally, some honest commentary around the realities of providing Life insurance advice. It is cumbersome, risky and unprofitable as it currently stands.
This leaves the customer with 2 unpalatable alternatives: figure it out for themselves, by applying for group cover through super. Or call Real Insurance.
Upping the commission rates to at least 88% upfront, and SOAs under 10 pages would be a start!