Commissions on life insurance needs to banned and a rigorous code of conduct is needed, Industry Super Australia (ISA) believes.
This call from the super body came after insurance scandals were published in media this week, and the ongoing lobbying from life insurers and banks to avoid a ban on commissions and to design their own code of conduct.
ISA chief executive, David Whiteley, said the scandals were causing harm to the Australian public and it was incumbent on the banks and insurance industry to place the interests of the public first.
“Now they’re [banks and insurance firms] trying to water down consumer protection measures in the Life Insurance Remuneration Arrangements Bill currently before Parliament so they can continue to structure their life insurance businesses to maximise profitability,” Whiteley said.
ISA said suggested reforms on the Bill fell short in addressing the core problem of conflicted remuneration.
“Capping upfront commissions and reducing ongoing commissions may be an improvement on current practices but sends a message that commissions are acceptable in the life insurance market. They are not,” he said
“Conflicted remuneration, if allowed to remain in any guise, will continue to undermine outcomes for consumers, as confirmed by a large body of evidence. We need reform that phases out commissions once and for all.
“In addition, it is critical that the regulator is given responsibility for the development of a rigorous code of conduct that will improve treatment of consumers including in claims processing. Currently, in conjunction with the Government’s legislative package, the industry has been preparing its own code, without any public consultation. This is totally unacceptable.”
Exactly the sort of uninformed and bias “commentary” that we have come to expect from David Whiteley. The disfunction of the claims department at Comminsure has been an issue that many advisors have been aware of and one of the reasons that Comminsure is not used by our practice.
Care Super (one of the supposedly independent Industry Funds operating only for the benefit of their members) was not able to advise their clients about this because Comminsure was the only insurance option available to their members. On the issue of conflicts I wonder what sort of discounting (which at the end of the day is just as conflicted as a commission) Care received from Comminsure?
Once again we see that by removing professional advice from the process members are left with a less than optimal outcome.
Whilst the author is co-opting any bad press on life insurance to promote his message I find it hard to argue with the underlying point that commissions lead to a conflict of interest. I appreciate that commissions are a way of enabling everyday Australians to get cover (rather than just those who can afford to upfront the cost). I also appreciate that many in the industry have built there businesses over years in good faith based on the current framework and any changes could have significant detrimental effects on them through no fault of their own irrespective of whether there advice on the topic has been good or bad. However the access argument is akin to suggesting that because top tier accounting firms charge a lot for tax advice then only the rich use accountants and therefore accounts should start charging a commission so that everyone can access their services. In terms of the imp[act on the industry this clearly needs to be managed but the industry is not there to serve itself and so I can’t help but see this as a secondary issue.
The writer has no credential and expertise to write such a thing. First commission has nothing to do with CBA declining claims. Adviser do not decide or process the claims. And out of 4 cases on 4 pillar discussed 3 were from default cover inside industry super fund and employer super. If there is review required it should be on default insurance cover offered by industry funds, where the decline rate is very high.
More bollocks from the ISA trying to link the poor claim practices of CBA with the commission issue. I’m pretty sure that the Insurance companies don’t look at a policy and determine whether they have paid commission on it before they determine whether they will pay a claim or not. If you ban commissions, then many more people wont have to worry about making claims as they wont be insured in the first place.
It was also interesting to note that the scandals related to Comminsure not paying claims that were aired last night all related to group policies in Industry Super Funds. Perhaps the Trustees of these Super funds have questions to answer over the amount of commission paid to the Super Fund and the research they undertook to select Comminsure in the first place !!
What a stupid and very irresponsible thing to say. David Whiteley sounds like Donald Trump.
What a crazy comment as all the claims declined were from ISA funds where advisers were absent. This does not happen when advisers are there to support clients.
CommIssions has nothing to do with poor claims culture.
Issues of culture need to be addressed starting at the very top of organisations.