A later implementation deadline seems set to be the only change to the Life Insurance Framework (LIF) after the Federal Government’s response to the Financial System Inquiry (FSI) last week.
This is despite some niggling uncertainties stemming from the Assistant Treasurer’s comments.
Kelly O’Dwyer, who is also the Minister for Small Business, on Wednesday told a press conference: “There are changes to the up-front commissions that will be applied, and also the trailing commissions.”
Click here for a full transcript of the press conference.
Some risk advisers suggest this statement is slightly ambiguous, leaving some doubt around whether these “changes” refer to those already stipulated in the LIF, or to potential further amendments after more consultation.
Jeff Thurecht, director, Evalesco Financial Services, was the sole financial planner practitioner on the Life Insurance and Advice Working Group, which initially worked with John Trowbridge to develop the industry’s first recent attempt at reforms in January 2015.
“I think [O’Dwyer’s] main motivation is to give everybody involved time to work out the implementation of the changes, rather than any expectation that there will be further changes, but I don’t know if that necessarily rules out any further changes.
“I think they’re fairly focused on maintaining the level of commission they’ve come up with, but I don’t know whether they’re open to more changes,” he says.
Disappointment continues
Aaron Zelman, managing director of risk advice-focused financial planning practice MediBroker is less uncertain about the true meaning of O’Dwyer’s statement.
“What I read [this as saying] is that it’s delayed because of the initial short timeframe. I read it as though there are no further changes, and that’s a bit disappointing to me.
“I think there really needs to be [more changes], because there are going to be unintended consequences detrimentally affecting consumers, as well as small businesses,” he says.
Zelman says he is keen to see whether the new Assistant Treasurer’s joint portfolio, which explicitly includes small business, will affect her approach to the LIF reforms.
“They are separate things, but I’m hopeful that [small business] will be addressed to a greater degree. The delay itself [in LIF implementation] is pretty much expected, because there are a lot of changes required in a short period of time, so I’m not surprised.”
Things could have been worse
While both Zelman and Thurecht agree that there is little chance of further changes, Thurecht is more focused on the upside.
“I think there are significant positives in that they haven’t gone with the initial FSI recommendation, so I’m pleased that some of the work from the LIF has been held.
“And I guess from that viewpoint, it’s hard for someone who’s a new minister to come out and make too much else happen, so I guess we didn’t have any great expectations. But there was also the risk that they were going to go with the FSI recommendations,” Thurecht says.