This comes as associations such as the FPA, AFA and FSC face criticism from industry and the AIOFP over the handling of the process in the lead-up to the release of the LIF proposals.
Following a request from the federal government for the industry to find a solution to the life insurance industry’s challenges, the FPA jointly negotiated new reforms with the AFA and the FSC, the association said in a statement issued to media yesterday.
Before coming to the table to negotiate, the FPA said it consulted with its 11,000 members on a life insurance blueprint which “outlined a competitive and sustainable solution for the industry”.
“Specifically, the FPA consulted with members on a hybrid system that would allow commissions, with an upfront payment capped at four times the ongoing commission payment,” the statement from the association said. “This served to protect consumers from paying high fees by addressing remuneration.”
Another key point from the blueprint was to have a two-year responsibility period, or clawback policy, the FPA said.
“The FPA took on board the feedback gained from members on the Life Insurance Blueprint and fought hard for an appropriate outcome for both financial planners and consumers,” the statement said.
“While the FPA was unable to secure every recommendation put forward in the Blueprint, we continue to fight for a sensible interpretation of the outlined policy announced on 25 June 2015, particularly the interpretation of what constitutes a lapsed policy for the purpose of the clawback provisions.”
The association also reiterated that the only other official alternative was presented by the FSI and called for a level commission structure for risk advice.
Last week AIOFP released its own life insurance commission submission, which demanded changes to the LIF proposals.
AIOFP executive director Peter Johnston said the FPA, AFA and the FSC have engaged in a ‘good cop, bad cop’ routine, selling out advisers in the process.
The AFA has also clarified its position on the clawback provisions.
This week AFA chief executive Brad Fox said the three-year retention period is a “blunt instrument” but has strong government support as a measure to deal with inappropriate product replacement.
