Is the future of LIF really about choice?

29 July 2020

The future of the Life Insurance Framework (LIF) is bigger than just the question around commissions and comes down to an issue of consumer choice.

That was the bottom line of a Financial Services Council (FSC) webinar panel discussion in which both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) acknowledged that the whole question of the future of the LIF has become more complex since the regime was first put in place.

What is more, AFA chief executive, Phil Kewin said that the Australian Securities and Investments Commission should take that added complexity into account as part of the review of the LIF regime scheduled for next year.

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He said that any review of the LIF would require a review of lapse rates and premium levels but the question had now become whether it was wider than the issues which had formed the original core of the argument.

Kewin acknowledged that the AFA had been working with the FPA to determine “what success looked like” in terms of the LIF, with FPA chief executive, Dante De Gori saying that the jury was still out on whether the framework had been successful.

“The question has been asked in this forum about whether commissions should stay but for me we have to look at it the opposite way – it is about choice for consumers and it is about choice for advisers and how they want to structure their business,” De Gori said.

“If there were to be drastic changes to the LIF going forward then what you would be really doing is removing choice,” he said.




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Without commisions for insurances, insurance advice and choice will only be offered along with full financial advice and the vast majority of insurance advisers will become tied salaried advisers who only sell the product offered by their employer. Full advice and choice will only be offered to those willing to pay the $3000 pa + for full advice.

Selling insurances isnt a glamerous occupation. No one leaves school and says "i want to be a life insurance sales person". Its already becoming too hard and not profitable for most advisers and many holistic advice firms are turning clients with premiums under $5,000 pa away.

Please tell me one way that zero commissions will achieve better outcomes for anyone.

I re-read ASIC REP 413 the other day and it's very hard to get through without a strong feeling of regulatory bias. 

The statistical shortcomings of the report are well-known, and the layers of compliance various licensees have extrapolated out of the findings are increasingly repressive. That such a flawed report was allowed to drive government policy is...worrying, to say the least.

But perhaps most concerning - mainly because it doesn't seem to have changed - is this sense that ASIC swallow - hook, line and sinker - every word that comes out of the insurers mouths.

I'm not sure quite how insurers managed to gain this aura of omniscience and invincibility, but until the regulator sees them as the deeply flawed, poorly managed businesses that they are, I'm afraid we advisers will always be up against it. 

As merely one example - ASICs acceptance, without critique, of the insurers cowardly argument that 'first mover' disadvantage has prevented them from implementing effective change boggles the mind.

Another - the assumption commissions are the primary cause of lapses, ignoring insurer conduct as a contributing issue, blows me away. 

It hasn't been advisers that have dictated the self-defeating pricing 'strategies' of these companies over the years. It's their short-sighted management, obsessed with their quarterly premium flows and wilfully ignorant of sustainable underwriting that's led us into this dead end we now all find ourselves in. 

The insurers are not the victims, so this prolonged war on advisers in the defence of insurers makes no real sense. 

But I have very little confidence anything will change in the upcoming review, unfortunately.

They accepted the life insurance companies narrative because it played into ASIC's already deeply held dislike for financial advisers and commissions. The fact that the regulator then went on to produce research which was deliberately biased towards files of advisers who were suspected churners and then promoted the report as a representative sample takes it to a whole other level. That behavior is unforgivable. Peter Kell and Greg Medcraft should be held to account.

Completely correct Giggity. We have been collectively screwed. They will ultimately accept the end results of their betrayal of the adviser force. Reap what you sow bastards.

Giggity. not when it fits the narrative they are promoting. this is a losing battle. welcome to the new world. lies, lies and more lies. Let's not get in the way of executive bonuses.The self employed adviser is gone. thanks FSC.

As a business, we're out of all personal insurances. It was up to 30% of our revenue 3.5 years ago (upfront and ongoing) and ever since LIF we've actively stopped writing it and this year have finally passed on the remaining clients to an insurance only practitioner. Didn't even bother selling them, as we'd rather have a good ongoing cross-referral relationship.

Interesting that the ~$360k revenue wasn't that hard to replace when we chose to focus our energies elsewhere, and never been happier concentrating on only the areas we want to be in, where the risk/reward ratio is worth our involvement. Even more interesting how many other firms did similar, which surely must have had a flow on effect to the idiot insurance companies who helped orchestrate their own current dilemma.

Bit of a shame that FASEA means you can't have that cross referral arrangement in place, regardless or whether revenue sharing is involved or not.

So Dante De Gori thinks the jury is still out in regard to whether the LIF framework had been successful.
What jury is he referring to ?
It is blatantly obvious the LIF has and will continue to be the major contributing factor to the significant decline of the Life Insurance industry.
When you have a massive decline in new insurance business, a massive retraction of experienced risk insurance advisers and a massive increase in current and future claim liabilities along with escalating premium cost and cost of advice, where on earth does he think that everything will be just fine if things are left to remain as is ??
I am sick and tired of De Gori and Kewin pussyfooting around the stark reality of exactly what is happening.
Playing the softly softly approach failed in the past and has resulted in the current outcome.
I don't know if Sally Loane from the FSC was a contributing member of the webinar, but if she was, it is simply unacceptable as she was a prime contributor along with Kelly O'Dwyer in the formation and support of the complete mess that currently exists.
It's time to tell it like it is and stop playing the gentle, consultative card in the hopes that they will again only achieve a failed compromise position on behalf of these association's members.

I have given up being angry about this issue now. I just look at this nonsense and laugh. The FSC along with FPA and AFA can fight with ASIC about commissions until the cows come home and it will make no difference. Keeping LIF commissions will not resuscitate the dead corpse of life insurance advice in this country. It is too far gone. 60%+ of advisers will be gone in the next 18 months and those remaining are fundamentally and permanently changing their business models to exclude or substantially reduce life insurance advice. The fact that these buffoons don't seem to realise this, is a reflection of how out of touch they are.

Horse has bolted has hit the nail on the head. It is way too little way too late.
The industry is imploding. Corporate greed and lies from every consulting party involved in the insurance industry (excluding risk advisers) has screwed this once great business to the point of no return. RIP.

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