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.”
Comments
What a disgusting response by Sally Loane. She did not deem it fit to point out that commissions are standardised across companies or that advised Life insurance sales (through commissions) are proven to be better for the customer over her dodgy members direct sales. Or that these direct sellers of which the Royal Commission have found to be corrupt are not paid commissions - just salaries and bonuses. Of course the FSC would want commissions phased out so that advisers are out of the way and they can sell more junk insurance directly.
The FSC are simply a corrupt cartel lobbying group.
Wow!...just wow !
If ever there was hard evidence of really where the FSC sit, it's right there.
What a disgrace.
Any Life Insurance company that values the advised model for providing quality risk insurance advice in the best interest of the consumer should immediately resign their membership of the FSC as a protest.
The ones that don't , will be seen to be supporting Sally Loane's comments through association.
'Wow!...just wow !'
Nailed it!
Section 46 of the Competition and Consumer Act 2010 (CCA), prohibits corporations that have a substantial degree of market power from taking advantage of that power for the purpose of eliminating or substantially damaging a competitor, preventing the entry of a person into a market, or deterring or preventing a person from engaging in competitive conduct.
Subsection 46 (1AA) more specifically prohibits predatory pricing by a corporation with a substantial share of the market.
The Misuse of Market Power and the Effects Test should be applied to the FSC and it's Life Insurance company members as these companies are also distributing their own products via direct models in competition with the advised model. During the Life Insurance Framework negotiations, the FSC consistently recommended reductions in commissions to a level option only and the majority of Life Insurance companies did not stand up and stringently oppose them.
For one reason..........to damage and hurt a distribution competitor, that being the adviser.
It's time this was fully investigated and the ACCC engaged in the process.
Loane is alone on this one, all these big wigs and they fall to bits in front of a decent question or too. She could have simply said advisers are paid the SAME amount from every company so there is no BIAS. This is what you get with non industry people in roles that effect public opinion. Its a joke. Once again the horrible advisers are to blame. Not the fat cats sitting in the george street ivory tower calling the shots and reaping the actual rewards in the form of pay rises and bonuses. The FSC needs to be disbanded, they have too much market power and they are just way to self interested.
At the very least Loane should do the right thing and resign just because of her embarrassing performance and total lack of understanding in her responses to questions by the RC. It was embarrassing just to watch her.
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