The Federal Government and the Australian Securities and Investments Commission (ASIC) are continuing to be pressed to allow life/risk advisers some accommodation around the clawback rules as clients continue to seek to cancel or defer premiums.
Association of Financial Advisers (AFA) general manager, policy and Ppofessionalism, Phil Anderson confirmed that his organisation was continuing to press the Government and ASIC to allow some accommodations in recognition of the extraordinary circumstances being experienced by life/risk advisers and their clients.
He noted that clients were seeking to cancel or reduce premiums in the face of financial hardship and through no fault of their financial advisers who were very often working hard to find them alternatives.
Nonetheless if the policy was less than one year old, the adviser was faced with 100% clawback of their commission and 60% if it was cancelled in its second year.
Anderson said that, while the Government’s changes to an extension of the JobKeeper program was a good thing, it was undeniable that economic hardship would continue to be experienced.
He said that while there was no hard data available on the level of lapses leading to clawbacks, anecdotal evidence being received by the AFA suggested it was a real and growing problem as the impact of the COVID-19 pandemic continued to be felt.
“We’ve been notified a few hardship circumstances such as the woman whose partner was a self-employed travel agent and found themselves in a serious business decline and there have been others such as the man who had a perishables importation business,” Anderson said.
He acknowledged that while there were a range of options open to people in difficult financial circumstances including insurers granting premium holidays, the reality was that clients lost their insurance cover for the duration of the holiday.
At the same time, he said that where an adviser managed to secure a premium reduction, they were still exposed to the clawback.
“That is why we are talking with the Government and ASIC about ways around the situation,” he said.