Major industry head agrees LIF has had little impact on quality of advice

ClearView managing director Simon Swanson agrees that the Life Insurance Framework (LIF) had little impact on advice quality, following a survey launched by the financial services company this year.

The survey, conducted with ClearView members between 20 April and 23 May 2022 to support its ensuing Quality of Advice Review (QAR) submission to Treasury, found that the LIF had “no material impact” on advice quality and actually hindered advisers’ ability to serve clients.

Just 5 per cent said the LIF, introduced in 2018, did have a material impact on advice quality.

Appearing on a new episode of the ifa Show podcast, Mr Swanson said that view by the survey respondents was “a fair call”.

“My view is that's quite understandable too, because I don't actually think the LIF framework actually does have much impact on the quality of advice per se,” he said.

“I think there are other issues at play.”

Mr Swanson suggested that the ASIC 413 report into financial advice for life insurance and the corporate regulator’s surveillance around lapses had a much bigger impact.

However, he added that it would be wrong to say that the LIF had no impact at all, saying he doesn’t believe “a change of such significance” would have no effect.

“I do think it had some small impact and I suspect the impact was more in the length of life insurance policy staying in force. The average length of a life policy staying in force, is probably getting up to around seven years now. And that's actually a very good outcome,” he said.

“Part of that is, again, around the quality of advice. It's actually been generally lifted. Part of that is around the responsibility period being increased from one to two years as well.

“And you've seen that generally change. You've seen a reduction in rebroking. Other people call it churn, but I'd call it rebroking, that's actually reduced quite substantially in the industry. And you've seen that reflected in improving lapse rates across the industry. But I don't think the LIF reforms on their own, had a significant impact on that.”

ClearView’s survey also revealed that 67 per cent of respondents would stop providing standalone risk advice and 20 per cent are unsure if they would continue if further changes were made to life insurance commissions.

Around 70 per cent of advisers said they do not plan to change the way they charge for life insurance advice; 17 per cent are unsure and 13 per cent are willing to change.

Listen to the full podcast with Mr Swanson here.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.