A year out from the LIF review, ClearView urges no change

30 April 2020

Less than a year out from the Australian Securities and Investments Commission (ASIC) review of the Life Insurance Framework (LIF) major insurer Clearview has strongly reiterated its view that life insurance commissions should be retained.

Giving testimony before the House of Representatives Standing Committee on Economics, ClearView chief executive, Simon Swanson backed the position of no change to the LIF.

The committee is currently hearing submissions from the major insurers as part of its broader inquiry into the four major banks and other financial institutions.

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Swanson said Clearview’s public policy position was that the most pressing matters for the industry, aside from managing the impact of COVID-19, remained:

• Stable life insurance commission rates with no further changes;

• Tax deductibility of advice fees; and

• Unrestricted choice of life insurance provider for financial advisers and their clients.

Responding to questioning from West Australian Labor member, Dr Anne Aly that 78% of consumers who obtained life insurance through an adviser preferred to pay an upfront fee for advice with lower insurance premiums over the lifetime of the policy, Swanson said that advisers and their clients should continue choosing the most appropriate payment method, based on a client’s unique circumstances and needs.

“ClearView does not promote one remuneration model over another for life insurance advice,” he said, noting that within the company’s LifeSolutions product series, advisers could opt to receive commissions or reduce the commission to zero and charge a fee.

Advisers could also rebate commissions to the client and charge a fee or accept a combination of fees and commissions.

The Australian Securities and Investments Commission is scheduled to begin reviewing the LIF next year but signalled to the Royal Commission in 2018 that in the absence of significant improvement on the part of the industry it was minded to recommend the removal of commission-based arrangements.

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78% want to pay a fee ? Really? Where are these people? I have never met them. Do they hang around with the good Dr? Maybe some union friends? Did the good doctor ask if the clients wanted to pay out of their own pocket to help with claims too? Or wasnt this taken into account? We should be asking for commissions to be increased, the insurance market is shot without us, they are ALL struggling big time and will all go broke, premiums are increasing, APRA cant get them to turn a profit even by taking away agreed value and age 65 payment periods unless they get volume and quick, they wont be around for much longer, true story.

Those surveys are irrelevant because they don't tell the person what the likely fee would be. Most people think that a fair fee for advice around is insurance is about $300. So if you ask someone whether they'd take a 27% reduction in their premium for the life of the policy in exchange for an initial $300 fee of course they'll say yes. If you tell them it's $3k for the SOA plus implementation costs and that they may not even get a policy after being underwritten, 100% would turn that down.

100% correct.

re LIF review.. as John McEnroe once said in a angry fit.. YOU CANNOT BE SERIOUS!!

It's not just claims, chasing up failed payments, super rollovers for premiums, dealing with changes to the cover.

There's alot of work that commission pays for for those "experts" who don't do the job have no idea about.

We do not have a large book of risk but we half to 3/4 of an FTE on risk admin.

Insurers know banning commissions will kill their businesses but they are still trying to cling to the LIF rates brought in by false pretenses by them through the FSC. They can't keep discounting new business premiums and raising existing customers premiums to desperately increase new business forever.
They are completely reliant on advisers now.
Commissions work better for customers period. The current commission rates and clawback period do not cover the cost of advice period. Either they get back to the drawing board or the industry is doomed either way.

The FSC were complicit in the hatchet job delivered to advisers as a result of the LIF.
The Terms of Reference of the LIAWG working group were supposedly compromised with suspicion of the FSC dealing with Trowbridge directly without the rest of the working group informed.
There were calls for the whole working group process to be ceased and re-started based on this matter. This was rebuked by the FSC and Trowbridge.
Andrew Bragg (now Liberal Senator) was the mouthpiece for the FSC at the time and very ,very clearly indicated in several media releases and documents they wanted insurance commissions to be level only basis with a future preference for all insurance commissions to be gone.
Later, FSC CEO Sally Loane then went public announcing that financial advisers really earned their money for the work they did for Life Insurance advice !
The contradictions, the misunderstanding, the conflicted agendas and ideology have all contributed to a compromised position for advisers, their clients and the insurers themselves.
The solution to the primary catalyst and perceived problems of policy churn should never have been complicated at all.
Firstly, retain all insurance commissions at a consistent level of 80/20 across every insurer.
Secondly, any insurance policy that was replaced within a 2 year period from the last implementation date was only ever subject to a level commission only model.
Thirdly, have all Life Insurers agree to signing an industry wide memorandum of understanding they would record and report repetitive policy replacement activity to a centralised body and agree to either place these advisers on a level commission only model or cease accepting business.
This model would have allowed quality and ethical advisers to continue being remunerated fairly and equitably for the work they do, manage and significantly reduce any incidence of policy replacement behaviour and retain the relationships between insurers and quality advisers.
As a result of the outcome of LIF, we now have a significant decline in experienced risk insurance advisers, significantly increasing insurance premium cost, the once healthy and respectful relationships between advisers and insurers is non existent and the consumer is significantly worse off.
So, what have all these changes really achieved?.....nothing at all.
During the process, advisers, the AFA and various working groups all called for reasonable and fairly negotiated outcomes to benefit consumers without destroying adviser's businesses.
In the end, ASIC, the FSC, John Trowbridge, Kelly O'Dwyer and a plethora of ideologicaly driven consumer and left wing groups kept nailing the coffin shut.
And in amongst all this, the Life Insurance companies (except a couple), were prepared to sit back in silence and watch it all happen in the hope that shareholder driven value would increase based on paying out reduced commissions to advisers who were providing them with their client's business.
Relationships between advisers and insurers that had been in place for many years meant absolutely nothing.
There was little loyalty and support shown as the direct business was seen as a cheap alternative to increase profit.
It all backfired.
The manic obsession with how advisers were and are remunerated for Life Insurance advice was and is not driven by an identifiable and qualified consumer benefit, but driven by ideological agenda.
Kelly O'Dwyer in association with the FSC's Sally Loane repeatedly stated that the changes with LIF would result in enhanced consumer outcomes.
Now that Kelly O'Dwyer has left a trail of destruction and vacated her position, perhaps Sally Loane may wish to provide a media release as to exactly how the consumer is better off now than they previously were.
And maybe Andrew Bragg may wish to join in with Sally Loane to publicly admit the process was misguided and misunderstood ?.....but don't hold your breath.

Clearview have just increased existing customer premiums by between 10-35%. Since the LIF we have seen premiums increase by 50% plus bu all of the insurers. New business still being discounted though because the insurers are not getting much new business. Advisers can't afford to write new business on the LIF rates and clawback period and customers don't want to pay fees.

Increase the insurance pool by increasing commissions. Not that hard, it worked for over 100 years.

While I am at it - what is the cost to the public of all this bureaucracy, red tap & regulation. ASIC are killing the whole finance sector and the economy!

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