In a statement issued following the release of John Trowbridge’s report, the AFA – which was instrumental in the establishment of the LIAWG – said stakeholders should view the report with caution.
“Ideally this final report would have our complete support but unfortunately, in its current form, it does not,” said AFA chief executive Brad Fox.
“While acknowledging that there is a growing momentum from advisers towards fee for service, particularly for comprehensive financial advice, we believe Australians will pay more for life insurance advice if these recommendations are implemented.
“This is because advisers will need to charge their clients an additional fee in order to recover some of the costs of providing advice.”
Unless life insurance advice becomes less expensive to provide, or premiums are dropped, fewer Australians will be insured, Mr Fox warned.
At the same time, he said the AFA representatives on the LIAWG have “worked tirelessly” over recent months and that it was a “thorough process”.
There is no move towards fee for service on life insurance so please AFA get something right. THE advisers that fund the association are watching for the strength we expect from our association
The Trowbridge Report is nothing more than a stitch up by the life insurance companies. Level premiums are currently around 33%. Reducing them to 20% is a 40% reduction in my income. 40%!!!!! Why bother forming a cartel, when you can put together a ‘working group’ and screw us without ACCC scrutiny. My prediction – not one single consumer will ever get a discount as a result of these measures. The vertically integrated groups (AKA Banks) will pocket the money and bolster their direct channels. Who needs those pesky independent advisers giving unbiased advice anyway?
There’s been a lot a talk about premiums going up as a result of the proposed changes. The only explanation that makes sense is that insurance coys survive on incentivising advisers to churn every 3-5 years. Previous Trowbridge reports confirms and supports this. Why do insurers want churn? Because it’s an opportunity for them to manage risk by underwriting lives and as a result resetting the non-disclosure period. They also close off series, then incentives advisers to underwrite clients to move to the cheaper new series product. What does underwriting do? It resets the non-disclosure period. This is how insurers manage risk and is the only explanation that makes sense otherwise insurers under the proposed changes pay less for new business and keep it for longer. In the real world this is a good result for business but apparently not…
This report is a complete waste of time and is going nowhere. Sorry to say that the AFA have been led down the garden path.
Level commission will lift premium rates and all life companies know this. So the sum total of all of this is that insurances costs are going to be pushed up for consumers. Great job guys.