The Life Insurance and Advice Working Group’s interim report has been slammed by consumer groups for its conclusions on product commissions.
The Consumer Action Law Centre, Financial Rights Legal Centre, Choice and plaintiff law firm Maurice Blackburn have said, in a joint submission to the working group, that the life insurance industry has failed to take the problems with commission-based selling “seriously”.
“The industry’s response shows a lack of imagination, it hasn’t considered moving forward without commission-based sales,” Consumer Action Law Centre chief executive Gerard Brody said commenting on the joint submission.
“As long as there is a financial incentive for life insurance advisers to push certain products, there is little reason to think Australians will get advice that is prudent rather than profitable,” he said.
Mr Brody also commented that a fee for service model is a “much more transparent” and ethical remuneration model for the industry to use.
“It would mean consumers will know how much they’re paying, and will allow them to shop around for the broker with the lowest fees,” Mr Brody said.
Within the joint submission the consumer groups have also said the life insurance industry should improve disclosure, put an end to stepped premiums and strongly supported the development of an industry code of practice.
“When an industry is committed to developing and enforcing a code of practice, it can deliver real benefits to both consumers and those who are bound by the provisions of the code to which they subscribe,” the submission said.
“The lack of an effective system of self-regulation inevitably means that where issues arise, the result will be coercive regulation.”
“For any form of self-regulation to be effective a code of practice is required,” it said.