Serious questions need to be asked about whether the Trowbridge report will help or hinder consumer access to quality life insurance advice.
Does the Trowbridge report address the objectives of the Life Insurance and Advice Working Group?
Will it enable my consumers to receive quality life insurance advice?
Let’s play out the scenario. The recommendation to reduce upfront adviser remuneration will likely:
- Lead to less independent life insurance advisers and advice businesses;
- Less independent licensees; and
- Consumers will be driven to banks to obtain their advice
Will the cost of life insurance be reduced for the consumer?
There is no binding requirement for insurers to reduce the cost of life insurance given the upfront cost to implement advised life policies will be reduced by 20-25 per cent.
This report states that insurance premiums may reduce by 5-10 per cent but without any binding requirement consumers cannot rely on this.
These recommendations will require thorough examination and a serious risk assessment and modelling of the consequences. But some concerning outcomes may include:
- Reduced access to quality independent life insurance advice;
- Loss of employment in the independent advice channel;
- A competitive advantage to the bank-aligned advice, being a conflicted
distribution channel (seems like a return to the past aligned agency days)
- Access to non-aligned licensees; and
- The federal government revenues will be impacted in two ways, being loss
of revenue and increased reliance on public disability support.
Given there are significant market competition and structural issues and consumer consequences, it should be subject to public and political scrutiny.
Michael Nowak is a partner at Joe Nowak Financial Services Group and a former president of the AFA.