The Australian Securities and Investments Commission (ASIC) has admitted that it would be inappropriate to use the same controversial report which triggered the Life Insurance Framework (LIF) as the baseline for its review of current review of the LIF.
What is more, ASIC has acknowledged that the controversial report, REP 413, was in any case based on issues which substantially predated not only the LIF but the Future of Financial Advice (FOFA) reforms.
Answering a question on notice from Queensland Liberal back-bencher, Bert Van Mannen, ASIC sought to explain why, despite the manner in which REP 413 had influenced the Government on LIF, it would not be used as a baseline for the LIF review.
“It would be inappropriate to use REP 413 as a baseline for the LIF review,” the ASIC answer said. “The advice reviewed in ASIC Report 413 was provided over four years prior to the introduction of the LIF reforms and approximately half of the advice was provided prior to the introduction of the best interests duty and related obligations as part of the Future of Financial Advice Reforms.”
“ASIC was asked by Government to consider the extent to which the LIF reforms have improved the quality of advice. ASIC is therefore assessing the quality of advice for two randomly selected samples of personal life insurance advice files: one sample of files from 2017, shortly before the LIF reforms were introduced and one sample of files from 2021, shortly after the LIF reforms were fully phased in,” ASIC said. “This will allow ASIC to compare results to see if the quality of life insurance advice has improved since the LIF reforms.”
The ASIC answer comes against the background of life/risk advisers have consistently argued that REP 413 had represented a selective assessment of the reality of the life insurance sector, particularly with respect to churn.
Van Mannen had asked why REP 413 was not being used as a baseline, given that “If the trigger for the LIF reforms was the 2014 ASIC Report 413, then why isn’t this the baseline for the review, rather than 2017, which was well after the spotlight was placed on life insurance advice?”