Greetings to you all.
I have taken the opportunity to reflect on the Minister Shorten’s Statement last week to seek to ban commissions from life insurance sold within Superannuation arrangements, including level payments. My comments are made in the context of a self licensed advisor of 21 years experience with 1500 in-force policies within both individual and group facilities. Naturally over the years you have your fair share of claims with three in the last 12 months: a 38 year old male killed in a hit and run, a 53 year old male suiciding after the 13 month exclusion and a younger female in a cancer related matter. All of these had insurance sold to them through superannuation policies and whose beneficiaries received their proceeds promptly from the insurer. In my view each would have declined to have proceeded if a fee had been levied even with a slightly lower premium, as these were people of modest means.
The move to ban commissions was an unexpected development in policy not even commented on in the previous Anzac Day release by the former Minister Chris Bowen. It has been interpreted by the private sector in the industry as yet another ‘Sussex St’ ambit claim aimed at protecting the significant profit shares in the insurance group pools of the industry funds and making it harder again for advisors to compete with ongoing advice in the group superannuation market. The current Minister as a Union Representative Trustee of the predecessor Australian Super for 9 years would have been aware of the implications of this with first hand knowledge of the money involved and its use to fund in part TV advertising. Australian Super as the largest shareholder in Industry Services Network (ISN) would also support the wider agenda of seeking to agitate anti advisor sentiment and to belittle any income not earned from fees.
The wider issues of underinsurance in Australia have been well documented as has been the disastrous decisions to ban risk commissions in the UK which were quickly reversed. In short this was a calculated decision thought through with adequate knowledge of the fully intended consequences including the distortion of the insurance market by excluding insurance held outside of super from these proposals. While these proposals are still over two years from their stated commencement date and a few weeks before the latest date for the next Federal Election, the anger and confusion caused within the industry is universal. Having spent the last few days in Country NSW where cover and premiums are generally lower and the advisor is at the centre of the community it was clear that these business’s would simple collapse with their clients financially unable to pay fees to cover the time and costs involved.
As a CBD practice we have more flexibility and have always offered a choice between fees and brokerage for clients with the break even for a level commission insurance product being around $5000 premium. However this is not the norm for the industry and is only really viable for the top 5% of our population. Well where to from here? The coalition have been quick to condemn this policy and the Life Companies are gradually coming out of their shell as a change in Federal Government becomes more likely based on current opinion polls. The AFA and FPA are both mounting TV advertising campaigns funded in part by their membership and hopefully by Life Office executives who have been largely silent throughout this sad episode. x
The Neville Chamberlain ‘peace in out time approach’ has failed and has been seen as a weakness to be exploited. It is now time for the Winston Churchills to stand up and speak publicly and clearly. The widows of our clients testify to the value of insurance and our future potential claims deserve a lot better than being sold out and sacrificed for the building of market share by a politically based organisation.