Consumer Action Law Centre says that proposed changes from the life insurance industry, welcomed by Assistant Treasurer Josh Frydenberg, to overhaul excessive commission structures and questionable advice are a step in the right direction, but don’t go far enough.
“While life insurance advisors are still getting commissions, regardless of the size of those commissions, advisers will not be truly independent” says Gerard Brody, CEO of Consumer Action.
“This model perpetuates disincentives for advisers to provide strategic advice, or advise consumers to take out group life cover through superannuation. In a commission based system, an adviser must work for free when giving that kind of advice”.
Consumer Action says the industry’s proposal should significantly reduce the incentive for advisers to “churn” or inappropriately offer replacement policies. The requirement for public reporting on policy replacement data should improve transparency about this problem.
Consumer Action also welcomes a further review to ensure consumers are protected. Brody notes “the proposed three year review should be seen as an opportunity for further change – not mission accomplished. There’s much more work to do in changing the culture of a highly problematic industry.”
The Centre notes that implementation of the reforms remains unclear, including the compliance and enforcement model.
“Self regulation will not deter behaviour in this industry. If we want effective change there needs to be independent oversight and enforcement” says Brody.
“It’s good to see the industry come to the plate with this proposal, but the only way to truly protect Australians from the kind of behaviour we’ve seen in the past is to build on their proposals and ensure robust and independent monitoring and enforcement.”