Financial Services Council (FSC) chief executive, Sally Loane, has faced questioning at the Royal Commission on the relationship between the life insurance and financial advice industries, admitting that insurers effectively pay for their products to be sold.
Senior counsel assisting the Commission, Rowena Orr QC, directly asked Loane “what all this money is for”, referring to the $6 billion the inquiry heard earlier this week had been paid in commission to advisers from life insurers.
“I really couldn’t say with certainty … it’s paid to advisers for essentially selling their products,” Loane replied, then saying that insurers were paying for their products to be sold when Orr asked whether the “whole point” of commissions was to influence the advice given.
Orr also put to Loane that the cost of commissions was ultimately borne by the consumer in the form of increased commissions.
Following a trend in her testimony in which she was unable to answer many of Orr’s questions, the chief executive responded that she did not know and could not say.
Loane also would not directly say why or whether commissions for life insurance products should be phased out entirely, saying that the FSC wanted to first see the results of current reviews unfolding in the life/risk space.
“I think that is a view that various people have had [that they should be phased out], including in the FSC, [and] I think the reason that life insurance was carved out initially from FOFA [the Future of Financial Advice reforms] went to that tenement that life insurance is something that people have to be persuaded to buy, therefore people needed to be incentivised to sell it,” she said.
“But certainly we would like to see the effect of the legislation and the APRA review and make decisions then.”