Incomplete commission removal a failure: ISA
Industry Super Australia (ISA) has stated the Trowbridge Report was "disappointing in its failure" to remove all forms of commission based remuneration from life insurance and that phasing out commissions was the only way to build a professional financial advice sector.
ISA deputy chief executive, Robbie Campo, said while the report dealt with churn it failed to deal with conflicts of interest caused by commission, even if they are capped.
Campo stated that conflicted remuneration was "the primary cause of poor advice in Australia, featuring in every major advice scandal of the past decade" and would continue to undermine advice and insurance outcomes if allowed to remain.
Campo also weighed into the group insurance debate stating the Trowbridge Report failed to address the issue of advisers recommending life insurance outside of super - which can attract commissions - over group life policies inside super for which commissions are banned.
According to Campo this issued was not addressed despite last year's ASIC report into life insurance demonstrating advisers had a preference for commission based insurance which had led to inappropriate use of super savings to pay for costly personal insurance.
"A transition towards phasing out commission-based remuneration is the only long term sustainable solution compatible with a professional financial advice industry. Other options, such as allowing capped commissions only up to the value of advice provided, do not seem to have been seriously considered," Campo said.
"There is no evidence that sales commissions lead to or are necessary for higher levels of insurance coverage."
AUTHOR
Jason Spits
Recommended for you
The Federal Court has dismissed a conflicted remuneration case brought by ASIC against the director of life insurance distributor Freedom Group, where Bali holidays and Vespa purchases were among sales incentives.
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
