The legislation for reforming the life insurance sector should only be considered as a "step in the right direction" and not as a final outcome for the industry, Labor's federal Shadow Minister for Financial Services and Superannuation Jim Chalmers told parliament yesterday.
Addressing parliament in response to the legislation for reforming the life insurance sector – which has now passed through the House of Representatives – Mr Chalmers said that the bill was a "step in the right direction" and “worthy of support”, but should not be considered as the "arrival of a final destination".
“Labor believes these reforms are not perfect but they will start to improve the industry, and we will continue to seek ways to make the system work even better for consumers,” Mr Chalmers said.
“We strongly believe that the new framework must be monitored following implementation to establish whether it is working, or whether more needs to be done,” he added.
Mr Chalmers also said Labor’s “priority” is consumer protection and pointed out that the bill could “do better in this regard”.
“One concern is with the clawback provisions in the final package. The clawback provisions are limited to the first two years of a life insurance policy,” he said.
“We would not want to see financial advisers pressure customers to unnecessarily change their life insurance policy after two years, as a result of these changes.”
ASIC’s review of the effects the legislation has on the industry will also be integral to determining the future of the sector, he continued.
“If further evidence emerges that advisers are doing the wrong thing by people – and we can’t rule that out – then we need to be ready to consider and respond to that behaviour as well," Mr Chalmers said.
Meanwhile, Liberal backbencher and federal member for the Queensland electorate of Forde, Bert van Manen, told parliament he "cannot support" the bill in its present form due to the "significant damage" it will inflict on advisers and in particular those who specialise in life insurance advice.
Mr van Manen added that he could also not support the bill as it "does not deliver substantive consumer protections".
"What is essential for good insurance advice is a move to an advisory and fiduciary culture which focuses on strategic life insurance advice on a basis that is as holistic as possible. Whilst this bill reduces the financial incentives, it does not address the root causes of poor advice."
He continued: "Ultimately, this is a debate about profitability and returns to the insurer shareholders, not about consumer benefits. These reforms cannot be rushed without understanding the significant collateral damage being done by insurance companies."
It is understood that the legislation has passed through the House of Representatives and is now with a Senate review committee for further discussion until 15 March.