Shelf space fees should be banned from the life insurance industry as they create a conflict of interest, ClearView has argued in a new submission.
Commenting on a submission made to the Life Insurance and Advice Working Group, ClearView managing director Simon Swanson said he has called on the group to focus on improving customer outcomes by removing shelf space fees as they can influence advice.
“Shelf space fees are inequitable in the financial services industry and we believe they should be banned,” Mr Swanson said.
“A number of dealer groups require upfront payments, which start from around $100,000 and rise to over $300,000 per annum for life insurance products, to be placed on their APL.
“This means that customers are often recommended a product not because it’s the most suitable and appropriate, but because of an insurance company’s willingness and ability to pay shelf space fees,” he said.
Mr Swanson also said to further drive customer outcomes, competition and innovation the working group should also address “narrow” approved product lists (APLs).
“We believe there is an irrefutable case that the default position should be for an open architecture for approved product lists so that advisers are not unduly restricted and customers can have confidence that their adviser is genuinely meeting their best interest obligations,” Mr Swanson said.
Further outlining the points it raised in its submission, the listed insurer highlighted it has proposed the words ‘commission’ and 'incentives’ should be “abandoned” due to the negative connotation they carry.
“Instead, they should be replaced with alternative terms such as ‘adviser service fee’ or ‘financial support’,” a statement from ClearView said.
“Whenever [a] change in attitudes is called for in society, changing language to focus on the desired outcome is always an important element.
“This would also potentially help advisers better explain their value proposition and remuneration structure without the discussion being overshadowed by the negativity surrounding the word ‘commission’,” the statement said.