Commissions should be increased to 80% upfront and 20% ongoing, according to AMP, which would “more adequately reward financial advisors for their work and reverse the current trend of outflow of advisors providing occasional advice on life insurance which, in turn, facilitate access to life insurance advice and cover”.
AMP’s director of advice, Matt Lawler, said in a statement that their submission provided “practical, achievable and common sense recommendations for change.”
“We believe a commission system in life insurance with good governance practices in place to protect consumers is achievable, similar to the mortgage brokerage industry,” he said.
Industry associations also argued in their submissions to the review that life insurance commissions should stay.
A joint submission by a task force of 12 industry groups, including the Financial Services Council, argued that to ensure customer accessibility to risk advice, life insurance commissions must be retained.
The Association of Financial Advisors is calling for commissions to be increased to 80%. AFA chief executive Phil Anderson said consumers on the whole prefer to pay for their life insurance advice through commissions.
“We think what is important here is that consumers have access to the choice to pay by fee or the choice to pay by commission, and why we have suggested, as have others, that the current levels only remunerate not adequately advisers for all costs involved in providing life insurance advice,” he said.
“If you take the commissions away, you will ultimately see a substantial drop in the number of cases handled by advisors.”
The Financial Planning Association of Australia’s chief executive, Sarah Abood, said the association supports the current commission cap settings, and that if commission payments were reduced or removed, it would have “a further negative impact on the already large underinsurance deficit, leading to further adverse effects for consumers, and social security and disability support systems”.
But Industry Super Australia and consumer group CHOICE are calling for all commissions to be banned. Patrick Veyret, head of policy and government relations at CHOICE, said the commissions incentivize advisors to sell life insurance products that aren’t suited to people’s needs.
“Life insurance commission disputes lead advisors to recommend poor quality or even harmful products to their clients. Many of these conflicts are only permitted because of statutory exclusions that were heavily criticized in the final report of the Royal Banking Commission.
In its submission, Industry Super Australia stated that while commissions remain permitted for life insurance sold outside of supers, financial advisers will still have a clear incentive to recommend retail life insurance products rather than life insurance products. life within the super.
“This is unacceptable and the commission should be banned to remove this conflict of interest.”
After repeatedly saying insurance advisory fees should be reduced to zero, new Financial Services Minister Stephen Jones said in recent comments that he was ready to change his stance after wide consultation with the industry. .
The life insurance industry this week announced the formation of a new industry-leading body, called The Council of Australian Life Insurers. It will be officially established in the new fiscal year and is currently recruiting staff and a managing director.
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