Yesterday, the government issued draft regulations to support its LIF package, providing guidance on the controversial grandfathering and clawback provisions.
Ben Marshan, FPA’s manager of professional standards and advocacy said that while the FPA was “still studying the details, we note the regulations respond in a way consistent with the FPA’s submissions to the government and regulator on the Life Insurance Framework implementation.”
Further he said that the clawback exemptions were “sensible.”
“In particular, the clawback exemptions proposed in the regulations in regards to clawbacks in particular are a sensible approach to situations which may arise that are out of the hands of, or could not have been foreseen by, the planner when they developed the financial plan advice strategy recommended for the client,” he said.
“The clarification provided around the grandfathering of existing payments also provides certainty for financial planners and the businesses they work in while the life insurance framework is operating through the transition period.”
AFA chief executive Brad Fox said the draft regulations reflect the LIF legislation introduced in parliament earlier this year.
“The AFA welcomes Treasury releasing these draft regulations in line with the LIF reforms,” he said.
“We will review the regulations to better understand how Treasury’s proposals will impact financial advisers.”
In the exposure draft, the government said the regulations, combined with the legislation, will implement the reform package and are intended to address a number of issues raised during consultation on the legislation.
These include providing a 12-month transition period during which stamp duty relating to death benefits may be included in the calculation of commissions, while industry makes necessary system changes to exclude it in the future.
Further, it will prescribe certain limited circumstances under which ‘clawback’ arrangements are not intended to apply, such as in the case of self-harm by the insured, or where a premium is reduced due to a decision by the insured to quit smoking.
Arrangements will also be provided for the grandfathering of existing employee-employer remuneration in a manner broadly consistent with that under FOFA, the government said.
In February, Assistant Treasurer Kelly O’Dwyer introduced the LIF reform legislation into Parliament. Last month, the Senate Economics Legislation Committee recommended that the legislation be passed without any changes.
So we might avoid a clawback if the customer self harms or suicides which wouldn’t be covered under a claim in the first year anyway. An how often would a customer give up smoking in the first two years???
How about customers losing their jobs or being unable to afford excessive premium rises by the insurance companies so they have to reduce cover or cancel? How about admin mistakes by insurers?
The AFA and FPA have become the FSC’s court jesters and are have no benefit to their memberships.
I think our Professional bodies have still dropped the ball… there are many flaws in the LIF and here we have the FPA reckoning its ok. Shame on you. Support the adviser and not the FSC/ISN/Banks/Life companies who want the LIF to remain unchanged to protect their own profits. Client benefit? No, clearly that is not important. Maintain the rage, people.
Still asking – still no answers…….. Where is the consumer benefit?
#noconsumerbenefit #whodoesbenefit?