The ban on conflicted remuneration should extend to the general insurance industry and to all life policies, regardless of whether the policy was obtained through the superannuation system or not, according to Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST).
In May this year the Government sought stakeholder submissions on the five measures enacted in 2013 as part of the Future of Finance Advice (FoFA) reforms. One of these reforms was the ban on conflicted remuneration, including up-front and tailing commissions and like payments, for both individual and group risk insurance within superannuation. This reform sought to address the link between conflicted remuneration and quality of the advice.
Submissions by ISA and AIST argue that the “distinction between insurance purchased within or outside superannuation is arbitrary and irrelevant to the need for regulation across all life insurance.” It is argued that, by failing to extend the remuneration to all life insurance and general insurance, the industry has accepted that it will tolerate the provision of poor advice. The submissions also reference the 2014 ASIC report into retail life insurance which found that there was a clear link showing that commission affects the quality of advice consumers receive, with 96% of poor advice given by advisers paid under commission models. ISA and AIST submit that the Government should extend the ban “to ensure the availability, accessibility and affordability of high quality financial advice.”
Whether the Government adopts the approach suggested by the ISA and AIST, and produces a uniform approach regarding conflicted remuneration, remains to be seen.