Government to combine LIF, advice reviews

Addressing the FSC Life Insurance Summit on Wednesday, financial services minister Jane Hume said Treasury would now assume responsibility for the LIF review and combine the inquiry with a broader review of the quality of advice that had been a recommendation of commissioner Kenneth Hayne.

“It did seem like there was going to be some duplication of the work done, and I think one of the things that we’ve been trying to do [in the industry] is get some alignment in the work that we’ve been doing,” Ms Hume said.

“It seems silly to have one review on life insurance over at ASIC and another review of the quality of advice over at Treasury, so yes ASIC have already started the data collection on [the LIF review] but that data will now come back to Treasury for analysis.”

Ms Hume said the broader Quality of Advice Review would allow the government to “appropriately consider the full breadth of issues impacting on both the quality and affordability of all forms of advice”.

“As we undertake the Quality of Advice Review, important issues like the degree of underinsurance and maintaining access to affordable and quality advice will be at the forefront of our minds,” she said.

“These elements will enable us to achieve the objective of a thriving life insurance sector that provides access to quality insurance products tailored to meet the needs of Australians and their loved ones at a time when they need it the most.”

Ms Hume added that although it was important that remuneration structures in the advice sector “move closer towards an alignment with other professions”, that did not mean there was no future for commissions in risk advice.

“Not at all – Parliament has continued to allow commissions in life insurance and FASEA itself has acknowledged that commissions are an acceptable form of remuneration,” she said.

“I recognise that a flat fee charged for advice can be a challenging business proposition. Consumers struggle to understand what they’re paying for, they may not have cash to pay up front and advisers need to be paid for the work they do – work that’s fundamental to the proper functioning of the life insurance market.

“The issue with commissions is not their existence, the issue is when they influence the advice that’s given.”