The FSC and the AFA have announced they will collaborate to address the concerns raised by ASIC’s review of the life insurance and risk advice sector.
Following the release of the corporate regulator’s anticipated report into life insurance advice, the AFA - which has a large population of risk advisers among its membership - and the FSC - which represents a number of life insurers - said they will “jointly convene” a working group to specifically address retail life insurance product structures and distribution practices.
“It is critical that remuneration models in the life insurance industry are sustainable and practical for consumers and the industry,” FSC chief executive John Brogden said.
“As an industry, we will review the ASIC report and provide a considered response. We note ASIC will take enforcement action,” he said.
Mr Brogden also said that in recent years policymakers have “threatened life insurance” in a bipartisan manner.
“The ASIC report notes: The FOFA reforms did not extend the ban on conflicted remuneration to individual life insurance sales under personal advice,” Mr Brogden said.
“That is, commission payments for life risk insurance products (with the exceptions in paragraphs 42(a)–42(b)) are exempted from the ban on conflicted remuneration."
AFA chief executive Brad Fox said it is important that the financial advice profession and the broader financial services industry consider the report in detail and respond in a “comprehensive manner”.
“This is a key industry report and any report of this nature and magnitude needs to be comprehensively reviewed and analysed,” Mr Fox said.
“The majority of our members provide life insurance recommendations as a part of their service to clients,” he said.
“Therefore, it is vitally important for our members, and for their clients, that we consider all available options at the product, licensee, adviser and consumer levels to address the issues raised in the report."
FPA chief executive Mark Rantall also issued a statement calling on product manufacturers to re-assess their remuneration offers, while re-affirming the important role of advisers in combatting Australian under-insurance.