Addressing the FSC Life Insurance Summit this week, shadow financial services minister Stephen Jones said while Labor supported the government on the “broad direction” of financial services reform following the royal commission, many parts of its legislative response had thrown up “unintended consequences” where industry warnings had gone ignored.
“The question is not the direction of reform in our view but the unwillingness of the government to listen to advice on some of the unintended consequences,” Mr Jones said.
“Labor is willing to engage with industry, not on the broad direction of the reform but some of the technical detail where that has thrown up unintended consequences that cannot be demonstrated to be giving a consumer benefit.”
Mr Jones mentioned the Protecting Your Super reforms, which passed Parliament in 2019 and involved changes to super fund fees, the transfer of inactive low-balance accounts to the ATO and the removal of insurance for inactive members who did not opt in to cover.
The reforms have been criticised for leaving some younger workers in dangerous occupations in particular without default insurance cover, similarly to the government’s proposed Your Future Your Super reforms that were called out by industry fund Cbus this week for the potential impact on its members.
“The reforms within insurance in super is an area where the general thrust of the government’s reform was supported by Labor, but its unwillingness to listen to detail has had damaging consequences,” he said.
“The problem was advocates making sensible cases for amendments to the legislation had the doors closed in their face. That is not the right way to do reform.”
Tipping a federal election for March 2022, Mr Jones said if successful, Labor would be supportive of creating a clear distinction between simple and complex financial advice, giving consumers easier access to financial planning services and removing unnecessary red tape.
“On the issue of definitions around financial advice, these were propositions first mooted in the Murray inquiry nearly a decade ago,” he said.
“It’s not acceptable with all of the reform and the opportunities that have been going on that that simple but far reaching reform has not been made. I don’t find myself in the camp that seems to think more pages in more forms is going to lead to more consumer protection.
“Transparency and disclosure matter, but ASIC itself has acknowledged the limitations of disclosure as a tool for consumer protection, and the basis alone for industry regulation.
“We need to ensure as we work our way through the necessary adjustments so that increasing and improving consumer protection is not met with the lazy response of saying let’s create more forms.”
