Insurers clearly signal their backing for life/risk advisers

The major life/risk insurers have made clear they see financial advisers as being integral to the industry and have sent a clear message that any move to eliminate life/risk commissions after the 2021 review of the Life Insurance Framework should be carefully thought through.

As part of a review of the life/risk industry currently being conducted by Money Management, senior executives within TAL, MLC Life and Integrity Life all made clear they had concerns about the consequences of ending life/risk commissions.

TAL chief executive, Brett Clark said the company believed that community access to high quality financial advice and that, regardless of the remuneration framework, a vibrant financial advice sector supporting well informed customers was essential.

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“Financial advisers are small business operators, providing local employment opportunities, often trusted members of the community, who work hard to provide competitive insurance products and services for their clients.  The parallels with the recent debate on mortgage broking remuneration are very relevant and insightful,” he said.

Clark said the Life Insurance Framework (LIF) reforms had set out a commission framework to properly balance and align customer and adviser outcomes and that TAL support that framework.

“Any further changes beyond the scheduled 2021 review need to be examined carefully,” he said.

 Integrity Life chief executive, Chris Powell said life insurance products were complex and not well understood by consumers and on that basis professional risk advisers played a key role in analysing the life insurance needs of the consumer and recommending appropriate products and levels of cover based on the specific needs of their client.

“This is an incredibly important and essential role,” he said. “Fundamentally, Australians are underinsured.”

Powell said that while it might be true that there was always an element of conflicted remuneration in any commission, it was also true that Australian’s were unlikely to place the same level of value on the advice provided if they were required to pay for it separately.

“Thus, any proposal to remove commissions completely is likely to significantly reduce the levels of professional life risk advice taken up by the community as a whole,” he said. “Integrity Life strongly believes the decision to receive commissions or reduce them and move to a fee for service model is best resolved through transparency and agreement between the adviser and their client.”

“At the same time, we note that our systems have been built to be agnostic regarding fees and commissions. We can pay commissions or we can deduct them from the premium and allow the adviser to specify a fee for service,” Powell said. “Our systems can also handle mixed fee for service / reduced commission arrangements. Finally, whatever decision is made by this or any future Government, Integrity Life promises that we will strongly support advisers through any transition required.”

MLC Life’s chief customer officer, Retail and Group Insurance, Sean McCormack said the company supported a sustainable advice model and that currently, commissions – as a part of LIF – were an important part of this model.

“We support the LIF review by ASIC scheduled for 2021 and commend Commissioner Hayne on his recommendation that this review be continued. Our fear is that, without a robust alternative approach, reducing commissions to zero has the potential to push access to advised insurance out of reach for Australian’s on middle incomes. We support advised insurance both at the inception of a policy as well as on a regular basis through ongoing relationships.  Unintended consequences of reducing the access to advised insurance would not be a good outcome,” he said.

“If there are to be changes to commissions, any alternative model has to be viable for customers and advisers alike to ensure that underinsurance does not grow. Customers should be able to choose how they get access to insurance, and a removal of commissions may shrink that ability."




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Insurance companies don't care they are pushing more and more junk group policies year on year... Group insurance or direct insurance that don't pay out as well as advised policies...

Sounds like the Insurers inflows of new business are down - they now support advisers. With LIF, every Adviser was a "churner"

What a crock from these companies! They were all part of the same FSC who conned the government by not providing correct lapse data until after the LIF was passed and now they are just panicking because they can no longer rely on the sales of dodgy direct products post RC. TAL especially have been hit by the ban on outbound junk sales being the biggest perpetrators of this and having then to sack 50 outbound call center staff.
Both TAL and MLC BDM's are crying over their huge reductions in new business from advisers due to the LIF and now the same companies are in a panic.
Both TAL and MLC have in their panic mode have been reducing premiums on new business and increasing premiums on existing customer and are guilty of trying to create a churn issue that was not their in the first place.
Correct, banning commission on risk insurance will kill the market but these companies have to realise that the LIF is going to do that anyway. 60% with a 2 year clawback still makes providing risk advice unprofitable. So my suggestion to these idiots is to realise your days of dodgy junk direct insurance are over and you suddenly need advisers again. If you want business you are going to have to admit you got it wrong and lobby not just for commissions but for a reasonable level e.g. 80/20 1 year clawback. Start being honest with both ASIC and government about the real facts that churn was not an issue otherwise you are doomed too. Start being fair to your existing customers on premiums too not just new business.

Bang on the money with these comments!

I second those comments. Well said.

Agree- really well said

The insurers - and laterly muppets have effectively broken the profitability of insurance offerings for Australians. If you do you sums and work out if the business model is profitable - factoring lapse rates from earlier times - as a small player it totally an unviable business proposition. The product necessarily is complex - (what we are trying to cover is never meat and three vegs) the prospect of having to set aside significant cash flow to cover for lost business is just totally dumb. The adviser carries all the risk - sorry folks find some employee to do your bidding -
and yes I agree with the tone and sentiment expressed above. We should have more people stop being nice and sugar coating all - and tell em to P**s off. in this industry, Loyalty is always coin operated -

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