The Financial Services Council (FSC) has argued that the Life Insurance Framework (LIF) will “substantially benefit consumers”, but the AFA has countered it will only create barriers for Australians who want risk advice.
Following the federal government’s response to the Financial System Inquiry, FSC chief executive Sally Loane said the decision to move forward with the LIF will ensure consumers are better off.
“When implemented, this package of reforms which includes reduced commissions, extension of clawbacks to three years and the introduction of an industry-wide reporting regime, will substantially benefit consumers,” Ms Loane said.
However, AFA chief executive Brad Fox has rejected this notion and said the association is reminding insurers of the implications the framework will have both for clients and advisers.
“Feedback from our members shows they are concerned that the LIF as it stands does not offer significant consumer benefits,” Mr Fox told Risk Adviser.
“Reduced commissions and an extended clawback period will mean many advisers may have to charge fees in addition to the cost of the insurance – consumers may therefore pay more than they do today.
“This increases the barriers to Australians getting the insurance cover that they need,” he said.
Mr Fox added that it is “not enough” for the community to hope that direct or group insurance will be a suitable replacement for getting insurance through an adviser.
“Both of which have quality and claims issues compared to advised life insurance, and cannot fill the void left if advisers can’t afford to provide advice or consumers can’t afford to pay for it,” he said.