and Suncorp have welcomed the life insurance reform package recently announced by assistant treasurer Josh Frydenberg.
“The life insurance sector is vital for our community. Life insurance advisers and product manufacturers help to provide essential financial security to Australians,” Frydenberg says.
Global Wealth deputy managing director Gavin Pearce said, “We’re pleased to see acceptance across the industry that the insurance and advice sectors need to change in order to rebuild trust and fulfil the important objective of ensuring Australian’s are properly protected.”
“In my opinion, the prior and ongoing work of shadow treasurer Chris Bowen and more recently assistant treasurer Josh Frydenberg has been outstanding, said CEO Suncorp Life, Geoff Summerhayes. “These Ministers have facilitated a solution that appropriately balances the interests of the stakeholders involved.”
The proposed reforms were made after a series of events highlighted the need for change in the retail life insurance sector, starting in 2014 with ASIC’s review of life insurance advice.
ASIC’s report uncovered alarming levels of poor quality advice and identified a strong link between high upfront commissions and poor consumer outcomes.
This was followed by John Trowbridge’s industry-commissioned review in March, which suggested several measures to improve consumer outcomes plus modifying the upfront commission model.
“Many Australians still remain unaware of their protection needs or the implications of being under-protected, so maintaining and supporting a sustainable insurance advice industry is critical. Education and information need to remain on the agenda to help address this issue,” Pearce said.
“Adviser remuneration has been a hotly debated topic and consumed much of the attention. I recognise that advisers may experience some difficulty in adjusting, but I believe the long-term benefits will make the change worthwhile,” said Summerhayes.
The industry’s proposed reforms include abolishing the current high upfront commission structure, seeing the maximum total upfront commission fall by more than half the current industry maximum over a transition period to July 2018.
The package includes a number of measures that together will: address incentives for poor quality advice and conflicts of interest, strengthen monitoring and enforcement, increase transparency, and encourage industry innovation and efficiency.
Frydenberg said the Government will consider industry’s proposals in the context of its response to the Financial System Inquiry.
“Should these reforms proceed, the Government will ensure that there is appropriate monitoring of consumer outcomes – including the impact of the reforms on the cost of premiums.”
The key aspects of reform would roll out over a three year transition period, with a full review scheduled for the end of 2018.