Remuneration changes to life insurance commissions are obscuring the greater structural changes that need to take place in the life insurance sector, according to the AIA chief executive, Damien Mu.
“Remuneration changes are the headline issues but broader structural changes need to take place before we can even get to 1 January 2016 and the introduction of the first phase of changes,” Mu said.
“People are forgetting that the Life Insurance Framework (LIF) will require a re-engineering of the whole life insurance industry. If products are better designed we can expect better pricing but market forces will dictate price changes.”
He said while it was very clear the introduction of LIF will impact advisers, the wider outcomes will have a flow on affect across the sector.
“This change was never just an adviser issue even though that was ASIC’s [Australian Securities and Investments Commission] focus in their report last year. This has become about systemic change in the life insurance sector as the whole economics of that market will now have to change.”
As such, Mu said it was too early to tell if premiums will decrease as a result of the introduction of LIF as insurers were still examining how to structure products, services and process under the new LIF regime.
“Insurers will need to get the right focus on the right design of products that can be recommended by advisers to their clients. This will create a flow on effect across the whole market in the areas of cost, efficiency in serving the products, and the support that can be given to advisers.”
