Submission to LIAWG re life insurance advice and remuneration

The Consumer Action Law Centre, Financial Rights Legal Centre, Choice and Maurice Blackburn Lawyers jointly commented on the Interim report from the Life Insurance Advice Working Group about adviser remuneration and quality of advice.  The LIAWG Interim Report responds to a report by ASIC released in late 2014 which blames upfront commissions for the poor quality of advice that ASIC found when reviewing the industry.

Summary of our remarks:

• We welcome the interim report’s recommendation to remove full upfront commissions and comments that the life insurance industry takes the problems with commission-based selling seriously.
• However, we do not think the report has taken the problem of commission sales seriously enough, and we are disappointed that all remuneration options considered are commission based.
• We do not agree that commissions are necessarily required to sell life insurance advice. The challenge of moving away from commissions is a problem with the culture of advisers, not necessarily a problem with consumers.
• We recommend that the final report consider non-commission based remuneration options in more detail.
• We strongly support the development of an industry code of practice that is approved by either ASIC or the ACCC.
• A well designed ‘standard cover’ regime will offer part of a solution to the concerns about quality of advice raised in ASIC Report 413.
• We are concerned that Approved Product Lists will tend to limit effective competition and mislead consumers.
• We support the adoption of ASIC’s Life Insurance and Advice Checklist by the life insurance advice industry.