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The Federal Opposition is reserving judgement on the Cooper Review recommendation to ban insurance commissions while the financial planning sector battles it out with the super funds.
Both the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA) have vehemently opposed the proposed ban.
AFA chief executive Richard Klipin said a ban would only have adverse consequences for the Australian community.
“The super review seems to think it’s only about price, whereas insurance and the value that that delivers in terms of security for Australian families and business is now at stake,” he said.
The FPA’s chief executive, Mark Rantall, said the association was not averse to commissions in insurance being addressed at a later stage. However, the risk was currently too great considering the underinsurance problem.
“Insurance is a completely different product set to investments, and I don’t think we understand enough around the ramifications of removing commissions, particularly as it affects lower income earners,” he said.
On the other side of the fence, the Association of Superannuation Funds of Australia (ASFA) and the Industry Super Network (ISN) supported the Cooper Review recommendation.
ASFA’s Pauline Vamos said while there was a need to further gauge member sentiment, insurance commissions had to be addressed.
She said group insurance arrangements concerning superannuation and intra-fund advice had gone some way to addressing the underinsurance problem, but the next step was to find a better way for advisers and trustees to engage fund members.
“Payment around that is an entirely different issue, but commissions alone do not solve underinsurance,” she said. “If they did, it would have happened before now. So let’s look at it from a different perspective.”
ISN chief economist Sasha Vidler said the argument for keeping commissions did not hold water.
“Arguably, having low-cost insurance options combined with superannuation without commissions would be the best way to solve that underinsurance problem,” he said.
“The issue is whether you are getting neutral advice or not,” he said, adding that commissions were designed to bias the advice in favour of those products that pay the commissions.
While the Cooper Review has recommended banning commissions with respect to insurance in super, at the time of going to print the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, had not specifically referenced or commented on the issue.
A spokesperson for the Shadow Minister for Consumer Affairs, Financial Services, Superannuation and Corporate Law, Luke Hartsuyker, said the minister was considering Cooper’s report in its entirety and at this stage Hartsuyker was not making a commitment to support or reject any of the recommendations.
