The era of commissions for life insurance was a thing of the past
Long Journey for Insurance Advice
By Lachlan Colquhoun
The era of commissions for life insurance was a thing of the past and the industry business needed to embrace the journey to the fee based model, according to David Glen, from life insurer TAL.
Speaking in a panel discussion at the FSC’s Life Insurance Conference, Glen said that the Life Insurance Framework (LIF) for adviser remuneration, announced in 2015, was likely to be revisited by regulator ASIC in 2012 and it was “highly unlikely they are going to wind back the clock.”
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David Glen, TAL
“The likely outcome is going to be that we could get a complete ban on commissions,” said Glen, who is TAL’s National Technical Manager.
“Advisers need to evolve their business models. By moving to a fee based system it is good for the adviser’s business because it gives sustainability to the adviser’s book.”
It was, he said, a question of quantity against quality. Smaller books enabled better quality advice.
Former Federal MP Bernie Ripoll, known as the “father” of the Future of Financial Advice (FoFA) reforms and the chair of Parliamentary enquiries into scandals at investment firms Storm Financial and Opes Prime, said the life insurance industry was still dealing with ongoing issues of trust around selling practices.
Bernie Ripoll
“Trust at its lowest level it’s ever been in Australia in ever sector, and in financial services it is very low,” Ripoll said.
“What we are seeing is the rise of the consumer and power of the consumer and every issue relates back to that, they are the ones taking power.
“Sales people do need an incentive but we need to strike a balance on how to incentivise them to sell but not so they do the wrong thing.”
The panel on Law Reform agreed the industry had a three year opportunity to regain consumer confidence, and to prove to the Government and regulators that it could be trusted to self regulate in the future.
The audience in the session were asked if they believed the LIF reforms would add to the level of consumer trust in insurance advice.
In response, 56 percent said 'Yes,’ 15 percent said 'No’ and another 29 percent said they were 'Unsure.”
Simun Soljo, Allens
A second question asked the audience if the LIF reforms were attracting university graduates to the financial advice profession in the “same way” as the accounting and legal professions.
To this question, 74 percent said 'No,’ 20 percent said 'Yes’ and 6 percent said they are 'Unsure.”
“This shows that we are working from a low base,” said TAL’s David Glen.
“We have to take the first step and that is better education and outcomes from the consumer and we need to start that journey, and those survey responses indicate the length of that journey.
“The perception is that the adviser is a lower form of life than legal, or accounting or actuarial, and that is a perception that we as an industry need to change.”
