The Association of Financial Advisers (AFA) is looking to close the loophole that allows a carve-out for direct insurance sales that excludes it from the Life Insurance Framework (LIF), and has refuted the Financial Services Council's (FSC's) continued calls to seek a carve-out.
In a letter to members this week, AFA president, Deborah Kent, said that disappointingly, the FSC was continuing to campaign for a carve-out despite the Minister agreeing that there would be no carve-out for direct sales channels in November 2015.
In its feedback on the Exposure Draft Legislation and Explanatory Memorandum for the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2015, the FSC stated in its submission to the Treasury in December 2015 that more consultation was required to avoid unintended outcomes on direct life insurance distribution models.
"We see this behaviour from the FSC as unacceptable given the thoroughness of the negotiations and that the Minister had already publicly confirmed that LIF would apply to direct insurance," Kent said in the letter.
She said the AFA Board wanted to see this loophole closed before legislation and regulation was put into effect by the next government.
Kent reiterated the point made by others before her and warned advisers that none of the major parties had indicated that the LIF outcome would favour them more than the current form of LIF.
"Depending on which party forms power after the election, LIF may continue substantially in its current form, or it may not," she said.
Comments
This just shows you what the FSC (Banks & insurers) have wanted from the very beginning, since they first introduced the idea that churn was an issue, to then providing the "data" for ASIC's study, which they no doubt lobbied for.
The FSC aren't even being subtle with their positioning. They are definitely not allies to the FP road to a profession path.
On the Reserve Bank of Australia's website they have various interesting reports, one section detailing life insurance industry profits, and I quote:
"The life insurance industry remains well capitalised, with their capital position equivalent to 1.9 times APRA's prescribed amount. Profits increased in 2015, driven by a smaller loss on individual disability income insurance (commonly known as ‘income protection insurance’)". The graph they provide also clearly illustrates Life Insurer's Net Profit after Tax since 2009 has been over $AUD1billion, and since 2014 over $AUD1.5Billion.
I have forwarded the information to the Life Insurance Customer Group (LICG), who hopefully can incisively utilise this in their endeavours. I urge any planner who has not joined this group to add their support. They can be reached at [email protected]
Just to build on that - A recent MM article. Quote: "The APRA data showed.....that in the year ended December 2015, net profit after tax was $3.2 billion, up 30.9 per cent from the previous 12 months" http://www.moneymanagement.com.au/news/financial-planning/life-insurers-...
Yep, they are really struggling, especially after implementing 20% increase in premium across the board.
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