Soft dollars confirmed as factor in insurance within super
Soft dollar benefits between insurance companies and superannuation funds are a factor in virtually all insurance within superannuation commercial models, according to evidence provided to a Parliamentary Joint Committee by the Australian Securities and Investments Commission (ASIC).
A flow chart developed by ASIC and provided to the Parliamentary Joint Committee of inquiry into the Life Insurance Industry has portrayed soft dollar benefits as being a factor in almost every circumstance except with respect to the provision of direct insurance.
The flow chart, title “Who gets paid when consumers buy life insurance” details four scenarios for the sale of life insurance:
- When a consumer is defaulted into super by their employer;
- When a consumer becomes a member of a super fund by choice, without personal financial advice;
- When a consumer becomes a member of a super fund by choice, with personal financial advice; and
- And who gets paid when consumers buy life insurance through direct retail financial advice.
As well as soft dollar benefits, the flow-charts indicate that in all of the scenarios except the sale of direct life insurance, “profit sharing agreements” are also a common factor in arrangements.
The ASIC answer, to a question no notice from the committee, also explains the impact of the Life Insurance Framework and the degree to which commission arrangements for life/risk advisers have been impacted, including the fact that the two-year clawback arrangements start from 1 January, next year.
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