Hayne risk recommendation ‘irresponsible’, says licensee

Yesterday, ASIC indicated it would implement commissioner Kenneth Hayne’s recommendation to consider further reducing the cap on commissions in respect of life risk insurance products.

He said that, unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero.

Speaking to Risk Adviser, Lifespan Financial Planning chief executive Eugene Ardino called Mr Hayne’s recommendation “wrong and irresponsible”.

“If the cost of accessing insurance goes up, coverage will go down. Furthermore, it is difficult enough to get consumers to pay for insurance, let alone convince them that they should pay for advice on insurance and then pay for the actual insurance. This is evidenced by the approximately $2 trillion under-insurance problem in Australia,” Mr Ardino said.

Mr Ardino noted that if commissions on insurance are removed, there will be fewer advisers recommending that Australian consumers buy insurance, and therefore more people will be under-insured.

Further, he noted that even the most hard-nosed idealists could not argue with that.

“This exacerbation of the already significant under-insurance problem would outweigh any benefit arising from the modest increase in the standard of insurance advice from the abolition or reduction of insurance commissions,” Mr Ardino said.

“This is especially the case in the absence of any systemic or large-scale client losses caused from poor insurance advice from advisers.

“The two most important things a professional planner does are encouraging clients to save and ensuring they have the right amount of insurance to protect themselves and their families when things go wrong and threaten their life savings and quality of life. A lot of suffering is likely to result, and, in many cases, taxpayers will be left to help pick up the pieces.”

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].