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Insurance sector responds to ASIC report

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By Scott Hodder
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3 minute read

The Life Insurance and Advice Working Group (LIAWG) has released its initial response to a damning review of the industry’s sales practices by ASIC.

The LIAWG was formed by the Financial Services Council (FSC) and the Association of Financial Advisers (AFA) after the corporate regulator put the industry “on notice” with its 10 October 2014 review of retail life insurance advice.

Former APRA member John Trowbridge, who was appointed as independent chairman of the LIAWG in October 2014, said the FSC and the AFA had answered ASIC's challenge to take action on the review.

“ASIC has really thrown down the gauntlet to the industry to put in a set of recommendations out on what needs to be done without any real indication of how it might be done,” Mr Trowbridge said.

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“There are four keys areas of the report – [there is] the quality of advice, remuneration, [and the] other two areas are insurer practices and product offerings,” he added.

“So the process is the report has been released this morning as an issue of an options paper – it puts many questions on the table, it doesn’t make recommendations, it doesn’t make proposals, it simply airs all the issues and it is inviting submissions,” Mr Trowbridge said.

Mr Trowbridge also pointed out that the report considers how remuneration for insurance advice needs to be different from investment advice and why it is important to retain some form of commissions rather than ban them.

Although while Mr Trowbridge was unwilling to confirm which remuneration based model he would recommend, he did indicate that high upfront commissions are “not appropriate to continue”.

“I am offering a view – one is that nil commissions won’t work and the other is that the high upfront commissions of more than 100 per cent on the first year’s premium, we are ruling that one out too,” Mr Trowbridge said.

“But we haven’t ruled anything out between those two extremes.”

The LIAWG will be accepting submissions until the end of January 2015 and its final report will be released by the end of March 2015.

Insurance sector responds to ASIC report

The Life Insurance and Advice Working Group (LIAWG) has released its initial response to a damning review of the industry’s sales practices by ASIC.

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