The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 (the Bill) has passed through the Senate after two years of difficult debate.
The Association of Financial Advisers (AFA)’s ongoing advocacy efforts on behalf of members throughout the two years resulted in improvements to the Bill, which passed the Lower House in October 2016. These improvements include a level playing field for advisers, with no carve-outs for direct sales of life insurance; a delayed and consistent start date of 1 January 2018; uniform grandfathering of existing clients; the inclusion of policy fees and frequency loadings for commission calculations and greater fairness in the clawback rules.
“We were able to explain to Government the impact of LIF legislation on small business advisers and this is what we believe helped us achieve improved final outcomes when compared to the recommendations put forward by the FSI and the FSC,” said AFA CEO Brad Fox. “The Government listened to adviser concerns.”
Mr Fox said financial advisers arrange more than half of the total life insurance held by Australians and advised policies pay out more claims, have better contract definitions, and fewer complaints than the alternative channels of group and direct life insurance.
“As such, seeing a financial adviser to get life insurance is the best consumer option by a mile, and the changes brought by this Bill are designed to encourage the public to have more trust in using a financial adviser rather than taking the risk of arranging their own life insurance and getting a weak policy, or the wrong amount or type of insurance for their personal situation.”
Mr Fox said that the passing of the Bill does not mean that life insurance reform is now complete. “The Life Insurance Framework is wider than the Bill. It includes broadening Approved Product Lists, simplifying Statements of Advice, and very importantly a life insurer Code of Practice,” he said. “Progress has been made in these areas, but more work is required from the insurers, superannuation trustees, ASIC and some licensees to carry their share of life insurance reform and we will continue to push them to complete these reforms by the new remuneration start date.”
Mr Fox said the upcoming Parliamentary Joint Committee hearing into Life Insurance (the PJC hearing) will provide the AFA with another opportunity to highlight the advantages of getting life insurance through a financial adviser.
“We will be working to focus attention on completion of the remaining reforms by other players, while supporting our members as they prepare for the start date of 1 January 2018.”