The AFA has reservations about a carve-out loophole in the LIF that excludes insurance sales provided without advice from regulation, saying it may leave some consumers without protection and value.
In a letter to its members, AFA president Deborah Kent said it was leading the work with Treasury, Assistant Treasurer and Small Business Minister Kelly O’Dwyer and other associations to remove a carve-out that excludes direct insurance provided without advice from the LIF.
“What we are concerned about is leaving a carve-out for direct insurance where no advice is provided as that may see institutions target this area with models that fail to bring protection and value to consumers, and is also clearly unfair to advisers where the LIF would apply commission caps and clawback periods,” Ms Kent said in the letter.
Ms Kent also was disappointed by the FSC continuing to call for the carve-out in its submission to Treasury on 24 December 2015, stating that “more consultation is needed to avoid any unintended consequences on direct life insurance distribution models”.
“We see this behaviour from the FSC as unacceptable given the thoroughness of the negotiations and that the Minister has already publicly confirmed that LIF would apply to direct insurance,” she said.
Ms Kent also stated that another area of the LIF draft regulations that the AFA board needs to address is the period of time provided for employed advisers under workplace agreements to be excluded from the framework, to allow those agreements to be honoured with employees.
She argued that this would mean some sales channels of insurers would not be subject to commission caps and clawback until after those existing agreements end.
“We do not support that outcome as it creates an unfair application of LIF with respect to the majority of our members,” Ms Kent said.