Taylor puts ‘full range of options’ on the table for life insurance reform

The falling rate of life insurance coverage among Australians is “dire”, according to shadow treasurer Angus Taylor.

Adviser Ratings figures from last year found that the situation has devolved to the point that just 480 advisers are writing half of all new business.

Speaking at a dinner hosted by the Association of Independently Owned Financial Professionals (AIOFP) in Melbourne on Wednesday night, Taylor said there are “real issues” around how to get life insurance back into the market.

“The collapse in what's happened with life insurance, it's not good for Australians, and at the end of the day, about two-thirds of the money spent by the federal government is insurance,” he said.

“If Australians decide not to insure themselves, guess who has to step in? It'll be the government. If you want bigger government, get rid of the insurance industry. Well, I don't believe in bigger government … I want to see a healthy, thriving insurance industry, because we need that desperately for a country that makes government as large as it needs to be, but no larger than it absolutely has to be.”

While Taylor would not commit to rolling regulation back to the pre-Life Insurance Framework (LIF) conditions, he said there’s “no doubt” that commission levels have contributed heavily to under insurance.

“We have to get that fixed. Now, what that looks like, I think, is the really important question. Have we got the commission framework wrong? I think that's a good question,” the shadow treasurer said.

“I'm not going to say going back to the old position is necessarily the right answer. What I am going to say is that the position we were in back then meant that the products were getting out there to the people who needed them, and that's not happening at the moment.

“So, we've got to look hard at what's gone wrong and what the answer needs to be. I have no doubt that the commission restrictions right now are a part of that. I mean, that's clearly what's driven the change. How we get back to where we should be is a question we're open to further discussion, and we want to have those discussions.”

In November 2024, shadow financial services minister Luke Howarth also addressed the possibility of looking at the commission caps.

“Clearly, the 60 per cent upfront commission cap has made it unviable for advisers to sell life insurance to some people,” Howarth said at the time.

“The upfront commission means it isn’t worth doing the work involved. We have a situation where many Australians are now under-insured, can’t give advice on their life insurance, and the only clients worthwhile are wealthier and older, probably in my age bracket.

“The reality is, if you’ve got a young married couple with kids and a big mortgage, life insurance is probably important for them – accidents happen. Younger people, people starting a family, it’s important.”

Questioned on the potential for other methods of improving affordability of life insurance, including increasing the tax deductibility of premiums, Taylor said government should be looking at the “full range of options”.

“What levers can we pull to get insurance back to where it needs to be? We're talking about life insurance, more generally with insurance, I think we've got huge challenges,” he explained.

“Insurance premiums are going up at a rapid rate. There's no question that government is has played a role with heavy handed regulation that might have helped to push those premiums up.”

The shadow treasurer added, however, that any action taken to fix the provision of risk insurance has to be “affordable, it's got to be accessible, and it's got to be advisable”.

“If it's not those things, it's not good enough,” Taylor said.

“I think [tax deductibility] is one of the levers that we can look at. I don't think it's a simple one, because we've got to bring the community with us.

“The royal commission, of course, led to that outcome ultimately on commissions. But we've actually got to bring people with us and say, ‘Hey, hang on. We've got a problem now, and we've got to get this industry back on its feet’.”

The Coalition’s position on potentially reviewing insurance commissions, on the face of it, is in conflict with its stated position of implementing the Quality of Advice Review’s (QAR) recommendations in full, given Michelle Levy recommended that commission settings remain unchanged.

However, speaking with ifa on Wednesday, Taylor acknowledged that adopting the QAR is “not the whole answer”.

“It’s an important part of the journey, and we should have been getting on with it as quickly as possible. It’s taken too long,” he told ifa.

“That’s not to say that every recommendation in the QAR is perfect, or that it’s the full answer. There will be other things we’ll need to do, and life insurance is one where I’m acutely conscious of the fact that the industry is in decline, and yet it should be an industry that’s healthy.”