LIF workable but practices will come under pressure
Key industry stakeholders are backing the Life Insurance Framework (LIF) describing it as "workable" and welcoming the clarity it will provide.
However, Association of Financial Advisers (AFA) chief executive, Brad Fox, warned some groups would be put under pressure by the change to a hybrid remuneration regime based on a 60 per cent upfront commission over three years from 1 January 2016.
"We didn't get everything we wanted, but it was certainly beneficial to the outcome that the AFA and FPA (Financial Planning Association of Australia) worked so well together," he said.
"Practices will still be under financial pressure to adjust, but for most the transition period is long enough to successfully redesign their advice processes and charging models."
FPA chief executive, Mark Rantall, said the LIF announced today by Assistant Treasurer, Josh Frydenberg, provided consensus and would improve access to insurance advice.
"The reforms outlined today will benefit financial planners and consumers, and ultimately build a sustainable and affordable life insurance industry," he said.
Financial Services Council (FSC) chief executive, Sally Loane, said the recommendations of the Trowbridge Report "set the high level direction for the industry that this package seeks to deliver".
"Bringing the life and advice industries together to undergo an open independent process in search of reform solutions… was a ground-breaking approach," she said.
"The package includes a new remuneration model, development of a code of conduct, more product choice through the broadening of approved product lists and a review of statements of advice.
"These reforms will be supported by a Code of Conduct which the FSC is looking forward to developing in consultation with the community."
Insurers have also welcomed the reforms, with NAB wealth group executive and MLC chief executive, Andrew Hagger, describing the LIF as "a positive step".
While Suncorp Life chief executive, Geoff Summerhayes, said the announcement provided a clear direction for the industry.
"I recognise that advisers may experience some difficulty in adjusting, but I believe the long-term benefits will make the change worthwhile," he said.
"The full reform package is required to enable a sustainable system and rebuild credibility and trust with our customers."
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