TAL formally backs continuing life/risk commissions

The major insurers are making public their support for commission-based remuneration to continue for life/risk advisers beyond the 2021 review of the Life Insurance Framework, with TAL chief executive, Brett Clark, the latest to join the fray.

In doing so, Clark warned that a user-pays full-fee model would undoubtedly lead to the supply and availability of financial advice being much smaller than it is today and only affordable by wealthier consumers. 

Just days after ClearView chief executive, Simon Swanson committed his company to advocating for retention of commission-based remuneration for life/risk advice, Clark today declared: “The discussion and debate needs to be more sophisticated than which is better – a commission or fee-based remuneration model. The stakes are far higher than that.” 

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“We need to consider the issue holistically, from a number of different angles – consumer access to affordable financial advice, the supply of financial advice, the payment for that financial advice that ensures consumers can be confident in its quality and minimising any potential conflicts or risks,” Clark said in a public statement. 

 “The development of the LIF framework was an attempt to balance these interests and ensure a sustainable, high quality financial advice industry, which is good for consumers,” he said.

“The alternative of a user-pays full-fee model would undoubtedly lead to the supply and availability of financial advice being much smaller than it is today, and that financial advice would be affordable only for a much smaller population of wealthy consumers.  This doesn’t feel in the best interests of consumers, particularly in the context of banks exiting financial advice services.”

 “We believe the LIF commission-based model, alongside a legislated “best interest duty” for advisers, is a good model for both financial advisers and consumers which balances these perspectives.  Alternative models which limit consumer access to affordable financial advice, or the supply of financial advice, would need to be carefully examined.  Any further changes to the LIF framework beyond the scheduled 2021 ASIC review should also be considered carefully.” 

“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. We don’t want to depower competition while empowering large financial institutions at the expense of choice for consumer, and financial advisers play a critical role in that.” 

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Glad the CEO's are panicking. They thought after LIF they could just increase dodgy direct junk insurance (TAL being the largest in this market). RC has destroyed that dream. They know that no commission means they are out of business too because most customers will not pay a fee and suddenly they have to rely on advisers again.
The point they all seem to be missing is the LIF has already resulted in their business plummeting from (TAL BDM's saying they have no hope of hitting targets). Perhaps they should also wake up to the fact that 60% comms with a two year clawback still makes it unprofitable to give customers advice and write business.
The dodgy FSC (of which TAL sits in the board) were greedy and now they are reaping what they sow. Not a single piece of pity for any of them.

No one is missing any "points" about the LIF reforms, if anything, the LIF reforms made insurance more profitable for insurers due to year 2 clawbacks at 60% of upfront comms...
It's not like customers are getting a refund on insurance that protected them under the terms the insurance is issued under, just because they decide to cancel in year 2.

It's the advisers that take that hit while the insurers take the profit straight back to stakeholders.

The Key problem with insurance is this: Clients (Australians in particular) purchase covers in an impatient manner. They do not spend the time to understand the products functionality OR the mechanics of leveraging claims outcomes through the lens of what they are purchasing.

The best way to gain this understanding BEFORE A PURCHASE is to ASK a financial adviser about the product you wish to consider.

No one is forcing anyone to spend money on things they don't understand, it would be like going to a car yard and buying car with the lowest safety rating possible.... it still gets you from A to B but if a crash occurs ... well... YOU BOUGHT A LEMON.

This is why add ons are purchaseable, this is why advice exists.

The direct market couldn't even exist if it weren't for people trying to either; find a way around being underwritten OR ; just being generally thick headed with what is ACTUALLY being offered by the purchase they are making.

Everything a person needs to know is spelt out in black and white in the PDS, read it OR weep.
the "she'll be right" attitude does not apply to your financial wellbeing in any other area of life....
So why the hell apply it to insurance???

The insurers will never go out of business, they simply sell their book to larger and larger financial entities so that stakeholders can get a nice ROI.

TAL has now obtained majority market share in australia (with the acquisition of the suncorp group / asteron / GIO ETC.)

CEO's are anything but panicked, right now, it's a game of whoever backs consumer outcomes best will win the most business.
If you believe TAL haven't already think tanked their way out of this... you're simply not looking at the reality of the machine before you.

The provision of well advised insurance is most certainly mutually beneficial for all parties, consumers should simply do themselves a favour and ENSURE they purchase adequate cover that mitigates ALL OF the risk they face... OR... FULLY understand that without the outlay on a comprehensive cover, they may obviously leave themselves at risk of not having their needs met by a product they DID NOT purchase.

it REALLY IS, that simple.

Gee, I have to laugh..during the height of the LIF not one company, other than Zurich, came out in support of the work the advisers do in assisting clients with Insurance Strategies and the current remuneration rates should be around the 88/22 mark with a 1 year responsibility. The rest of the Insurers were muzzled by the FSC. Now at the 11th hour they come in beating their chest about how important we are to their bottom line!!

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