The life insurance sector has weeks and not months to respond to the recommendations of the Trowbridge Report with the Federal Government reluctantly prepared to step in and impose change according to Assistant Treasurer, Josh Frydenberg.
Speaking at an Financial Services Council (FSC) breakfast briefing in Sydney this morning Frydenberg said there was real pressure on the industry to respond and it “does not have many months, but weeks or at most a few months”.
He said appropriate reform ” as soon as possible must come from the industry and must not force the heavy hand of the Government to act”.
He said the Trowbridge and ASIC report Recommendations were worthy of consideration and “the extent to which we intervene depends on industry response. We will partner with industry as long as is prepared to address issues in ASIC report.”
He said the Financial System Inquiry report and the Trowbridge Report both address the “the misalignment of interest between advisers and consumers” stemming from upfront commissions with the later report putting a numerical framework as to how to deal with the issue and these ideas should be considered.
“My preference is industry acts as the Government can’t mandate a level of commission, we can’t be that prescriptive,” Frydenberg said.
“If it is a core problem, then it is up to industry to move away from up front and to level commissions and to determine what they are.”
He said the Government was sensitive to issues that low commissions may impact independent advisers compared with “big end of town groups who can cross subsidise the cost of advice”.
