Industry unites to retain risk commissions

AFA chief executive Philip Kewin told ifa the Choice and Access to Life Insurance (CALI) campaign had come about due to previous feedback from government that the industry had been “divided” on changes to risk advice regulation.

“In conjunction with the FPA we created a joint insurance taskforce so that we could have a united approach to a common goal, [and] so we could remove one of the key elements that was lobbed at us as criticism, which was that the advice profession is divided,” Mr Kewin said.

“We started to engage with insurers and it seems they themselves saw a problem they wanted to try and fix.

“You just have to look at the inflows into the different insurers, very few are in a growth mode, so I think it’s a recognition that we’ve got a far better chance of doing things collectively.”

Mr Kewin said the ultimate goal of the group was to “retain choice” and “protect the current environment” around risk advice commissions “as a minimum”.

“ASIC has the power to reduce upfront commissions to zero, so the main thing we want to do is make sure there is no reason given to consider that,” he said.

“Whether that leads to further discussions around what the suitability of caps are, we’d always be open to that conversation.”

Research commissioned by CALI, which includes representatives from four major life insurers, found that 20 per cent of Australians in the 25-34 and 35-44 age groups were now considered underinsured.

Mr Kewin said the research pointed to the failure of the LIF on several of its stated policy aims, which were around improving the quality of life insurance products and advice for consumers.

“LIF was supposed to produce lower premiums, but on average premiums have gone up, it was supposed to reduce lapse rates and lapse rates haven’t come down, and the quality of the product being delivered to the consumer hasn’t improved because there are so many challenges in the industry at the moment,” he said.

He added that the unified group had so far met with a positive reception in Canberra.

“We’re having good discussions with the minister and with the opposition – they can see as an industry we seem to be a lot more cohesive, so hopefully it will lead to a good outcome,” Mr Kewin said.