The head of a financial advisory firm has called for an end to reform of Australia's life insurance sector claiming participants should move to solve issues rather than rely on further regulation.
Patron Financial Advice general manager Rob McCann said industry reform, outside of the federal government's Future of Financial Advice (FOFA) reforms, would restrict and unfairly penalise financial advisers.
He pointed to the Financial Services Council's (FSC) proposed churning reforms as a prime example.
"I just don't think that advisers, during the process of FOFA [Future of Financial Advice] and other reforms like we saw with the super reforms and MySuper, could handle dramatic change to the way they can operate in the life insurance industry at the same time," McCann said.
"So I'd say to them leave them alone and let us work with the life company on fixing it."
He said the underlying cause of nearly 40 per cent of risk policy being replacement business last year is a result of the changing economic environment and increased competition between life insurance companies rather than unscrupulous behaviour of financial advisers.
"The life insurance industry is perfectly capable of weeding out any bad apples on its own merit. However removing upfront commissions, extending responsibility periods and removing or replacing policy terms, coupled with FOFA's compliance frameworks reforms, will be an onerous and costly cross to bear for all financial advisers," he said.
McCann said he has been in discussions with insurers Asteron and Tower over possible solutions to issues.
"I'm working with them closely on them some of the issues that may exist with some of the Patron advisers," he said.
A spokesperson for FSC was unavailable for comment by InvestorDaily's deadline.
Earlier this month, the federal government, through the release of its first FOFA draft legislation, clarified its position on Australia's life insurance sector.
In a bid to tackle concern around churning, the government intends to introduce level commissions on replacement polices.
"The Government will work with industry and consumer groups on the most effective way of implementing this reform," the Minister for Financial Services Bill Shorten said.
Shorten said issues of conflicted remuneration, including the treatment of life insurance commissions, will be covered in the second tranche of FOFA legislation.
