QAR should ‘reignite’ interest in risk advice, says professional

It’s no secret that Australia has an underinsurance problem, but while advisers are critical to solving this, insurers recognise the significant time constraints advisers are grappling with.

Speaking to ifa on Tuesday, Adam Crabbe, risk strategy specialist at Zurich, said the Quality of Advice Review (QAR) has the potential to reduce the current workload carried by advisers.

“Advisers are time-poor, so I think if there’s a way that perhaps, with QAR, if there’s an ability to reduce the workload that’s required, I’ve no doubt that that will certainly help existing life insurance advisers, but potentially others that are looking to maybe reignite their interests in life insurance advice to maybe do just that,” Mr Crabbe said.

“Because with that reduced complexity, it’s a reduced cost to serve, so there’s perhaps a greater willingness to re-enter.”

Last week, the government published the first tranche of legislation in response to the QAR. In it, the government presented draft law for recommendations 13.7 to 13.9 which relates to obtaining consent for life insurance, general insurance, and consumer credit insurance commissions.

Unsurprisingly, the draft legislation proposes to retain all of the current caps on commissions, such as the 60 per cent upfront commissions and 20 per cent trailing commissions, with a two-year clawback for life insurance. Moreover, it also seeks to enshrine in law the requirement for advisers to seek one-off consent from their clients, in writing, to receive a commission.

According to the draft law, the long-term goal of this recommendation is to work in concert with the rest of the reforms to incentivise the provision of risk advice through fees and reduce the reliance on commissions.

Touching on these recommendations and their inclusion in the first tranche of legislation, Mr Crabbe said that by improving the “efficiency piece”, an area advisers find “very labour intensive”, the burden would be lessened and the onus taken off commissions.

“I know for many advisers, a higher commission would be ideal, but I think that in itself … the efficiency piece is critically important,” Mr Crabbe said.

On the topic of encouraging more advisers to re-join the risk industry, Mr Crabbe said insurers play a key role especially when it comes to improving efficiencies.

“We’ve invested really heavily in that digital aspect, really trying to make that whole job of advice much more fluid and easier for advisers, but there still remains complexity in products,” Mr Crabbe said.

“I think for many licensees, they’re still working through the compliance element, which often becomes an increased workload which leads to an increased cost which for many consumers, there’s perhaps a reluctance to want to pay and that’s not necessarily new.”

He highlighted Zurich’s dedication to advice and noted that “advocating for advisers” is one of its “core strengths”.

“For us, advice remains core,” Mr Crabbe concluded.