ROUNDTABLE: The real risk in FoFA

COOK: But that’s the thing about this industry that we’re a part of is that, as Rick was alluding to, a lot of the decisions around what’s an appropriate level of cover are subjective rather than objective. You know, about if you’ve got three children under age 10, do you want your income stream to continue until the youngest one’s past university age, or five years, if your opinion’s that way.

So yeah, look, I think for the most part people need to get advice. Exactly whether it’s a delivered across the table or over the internet or over the phone, I think there’s a case for different types of delivery.

DE GORI: It’s critical to get these FOFA reforms right, and so the banning of commission is a massive threat. I’ll say it’s a threat, but in respect of that, of the overall changes that FOFA are presenting, we need to make sure we get the details right for the future of financial planning, full stop, let alone risk advice.

But then irrespective of those changes, irrespective of what the industry will look like, the key message is about promoting it to the Australian public, and risk advice, risk insurance, is important and they do need it. To the Australian public, for them, it’s about whether or not they’re getting protection. And they’ve got the ability to get that protection, whether it’s through a professional or via the internet. We’re going down that road and there can be different avenues of getting that insurance.

But I think it’s critical that we address two key issues. One is the reforms in terms of the way each industry is going to be shaped going forward. But the other part of the puzzle which we haven’t solved, and it’s been an issue for 100 years, is the fact that Australians need insurance cover. And FOFA is not going to address that. We need to address that.

BROWNE: I see the government’s response to Cooper, Henry and Ripoll as the most serious threat to the insurance industry since I’ve been part of the insurance industry, for 15 years. I’m troubled by it because of its implications for a large number of advisers and the implications for their clients. I perceive that if commissions are banned that the economic and social consequence for Australia is going to be significant.

That’s going to translate to more burden on the public purse rather than the private sector and we need to all step up and communicate as one of the things that we agreed to on the value of our industry, the worth that we bring to it. And you know, this is the first time that I’ve been part of a forum where the heads of the three industry lobby are together to get such clarity that there is so much common ground. I’ll extend an invitation; I’ll be inviting the three of you to another conversation about this specific matter so that we can share our knowledge, we can share our thinking and roll it out to effect.

SATILL: The possibility of commissions being banished is naturally not only a real threat but the most critical threat ever to our industry. I think that certainly what’s come out of this meeting today is that the big problem is that there’s so many factions and they’re not all singing off the same hymn sheet. I am a specialist risk adviser and I’m that for a reason, because I believe that I can’t do all things for all people and by specialising in what I do, I’m pretty good at what I do.

“It’s critical to get these FOFA reforms right, and so the banning of commission is a massive threat”

And I think, quite honestly, at the risk of being very controversial, I think that the same should be done with the associations. I’m not even a member of any association. Quite honestly I think that you guys should represent the investment guys and you guys should invent the risk guys and you should stay out of our business and we should stay out of yours. You know, you should be representing the manufacturers et cetera. Because I don’t think that everybody understands each other’s business.

DI CRISTOFORO: I think the discussion around the FOFA recommendations are a risk but, at the risk of being potentially naively optimistic, I actually think the social and community costs of making a change is partially understood by the people who are talking about this on the regulatory side, and I think with a more consistent message, particularly out of the associations, as well as us individuals, I think we’ve got to take some responsibility for stepping up when you call to have a chat to Treasury or whoever we are to make sure that they’re aware that anything that’s done that potentially damages the ability of a person to be able to get life protecting insurance is a problem.

Even a status quo situation could do that potential damage, because we’ve already acknowledged that not enough people are aware of the need, so we need to change just the approach the industry takes in educating people.

And then also the side of how does it actually get distributed within the real world? How do people walk down the street and say, “I need life insurance and income protection,” in the same way they think, “I need home and contents insurance.”? You know, that is the level that needs to be educated. So that change is necessary. Anything else that’s going to damage it is going to have social costs.

But yeah, I’m slightly optimistic. I think it’s a risk but I think it causes us to bring together that view. I mean obviously the bigger risk is around the remuneration in other areas.

KLIPIN: I’m only optimistic about the future of the industry. The stats are quite clear: people are getting older, people aren’t going to have enough, they don’t save enough, they’re not covered enough. The market opportunity is just monstrous. We’ve just got to get our act together to get that message clear.

FOFA banning commissions, it’s lose. Lose for the government, lose for consumers, lose for advisers, lose for manufacturers. You wouldn’t, as a politician, enter any piece of policy and have loss for all your key stakeholders. We need to make that point, and we need to make it really clear.

The third thing is, we’ve got to get the vast majority of advisers who are not advising on insurance to understand that insurance is basically a central plank of any successful plan. No insurance, no plan, if the worst happens.

And the final thing is basically this communication message. We need to collectively get out and harness the power that sits around this table and outside this room to get the message on the television screens, the newspapers, the bus stops, of what insurance will do for people when it’s there. And whether you use a scare method, like the bushfire issue, or the Grim Reaper in the AIDS campaign, or whether you use a positive, constructive, logical message doesn’t really matter. The main thing is to get it out in the marketplace.