The risk insurance industry has been unduly impacted by the Future of Financial Advice (FOFA) changes because the Government has adopted a 'one size fits all' approach, according to the National Insurance Brokers Association (NIBA).
In a submission filed with the Parliamentary Joint Committee (PJC) reviewing the FOFA legislation, NIBA claimed the FOFA reforms arose as a result of issues identified by the PJC in its inquiry into financial products and services in Australia (PJC Inquiry), which "were clearly focused on the investment and superannuation industries and financial planners".
"The general insurance and stand-alone non-investment linked life insurance industries (risk insurance) were never intended to be and were not a focus of the Inquiry," the submission said.
It said that any of the recommendations arising out of the original PJC inquiry relating to risk insurance were limited in nature and arose in circumstances where an appropriately focused review of risk insurance and relevant stakeholders had not taken place.
"The risk insurance industry is distinctly different to the investment and superannuation industries in significant ways. This has been shown in the insurance specific amendments made since the introduction of Chapter 7 of the Corporations Act which was originally enacted as a 'a one size fits all' regime," the submission said.
It said such changes were all made once the reality of the specialised nature of risk insurance was understood by Government.
The submission said that it was on this basis that NIBA was opposed to the 'one size fits all' approach to the regulation of financial services in Australia, "especially where proper analysis and consideration of the issues unique to the risk insurance industry has not been properly undertaken by Government".
The NIBA submission went on to say that the organisation believed that the perceived benefits for retail clients advised by insurance brokers in relation to risk insurance were likely to be outweighed by the detriments associated with the imposition of a statutory duty on insurance brokers.
"There is no evidence of any problem in the risk insurance market akin to that identified for financial planners on which the PJC Inquiry was actually focused and there are significant differences between the risk insurance market and investment products," it said.
The submission said no evidence has been provided by the PJC Inquiry or Federal Government of any fundamental or systemic problems with the provision of advice in relation to the risk insurance industry that were of a nature that would justify the introduction of a new suite of statutory reforms, and the resulting costs and market impact associated with it.
