Members of a Parliamentary Committee have suggested that shelf space fees have simply morphed into education fees under arrangements negotiated by product manufacturers and licensees.
The Parliamentary Joint Committee investigating the life insurance industry has interrogated insurance industry executives about the workings of approved product lists (APLs) and whether the product manufacturers are paying what amounts to shelf-space fees.
NSW Labor Party Senator, Deborah O’Neill used a public hearing to question Zurich executives and suggested that “shelf space fee had turned into ‘Now we pay an education fee’”.
“We have heard that the quantum of money is quite significant,” she said. “This could potentially be a corrupting behaviour that is not necessarily good for the industry or for clients who are seeking insurance.”
However, Zurich Financial Services Australia chief executive, life and investments, Tim Bailey said this was not the case and that the new APL standards ensured the need for transparency.
“…our view is that there need to be probably more than two providers to provide appropriate choice across APLs,” he said. “I think the balance, if approved product lists get wider, is that then really requires advisers to have the full, detailed knowledge across all of those products.”
“I think there is a trade-off between the breadth of choice and their ability to fully understand the breadth of propositions, especially given that we are in a very competitive market where all of us are continuously looking to improve our customer proposition.”