By Bernie Ripoll, Director
The Parliament recently passed legislation to change commissions paid to advisers in the Life Insurance sector that will commence on 1 January 2018.
The changes will mean reduced upfront commissions paid to advisers and the introduction of a cap to a maximum of 20 per cent for ongoing commissions.
Under the Future of Financial Advice reforms introduced in 2013, the insurance sector was not included in the reforms due to concerns at the time it would exacerbate the under-insurance problems in Australia, however, it was always the intention to return to the issue sometime later.
The suite of reforms emanates from the Trowbridge review and will go some way to addressing the ongoing issue of quality of advice, and adviser incentives that often led to consumers being led into the wrong products or unnecessary product replacement.
The Parliament has by-and-large addressed these concerns through the recent amendments to the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016.
The old days of high upfront commissions of up to 130 per cent will be a thing of the past.
In addition, the PJC Corporations and Financial Services Committee Inquiry into Life Insurance Industry is currently examining the need for further reform and improved oversight of the life insurance industry and is due to report on the 30th October this year.
Coupled with the recent adoption of the Life Insurance Code of Practice which sets out minimum standards for the life insurance industry and covers a wide range of issues, the sector is working to lift the standard of practice in life insurance and improve service to consumers.
This is great news for consumers and another step forward in the professionalisation path of the sector.