Prominent Liberal MP and former financial adviser Bert van Manen yesterday lent support to the insurance advice industry’s push to retain commissions, saying he doesn’t have a problem with them “at all”.
“I think they’re a perfectly valid form of remuneration,” van Manen said at the AIA 2021 Adviser Summit digital conference. “There’s a number of industries that have that commission model as well, insurance shouldn’t be exempted from that.”
The MP’s comments came less than an hour after Labor party shadow assistant treasurer and shadow minister for financial services Stephen Jones reaffirmed his view that insurance commissions are inherently conflicted and should be banned.
“Conflicted remuneration is a problem, that’s the position I start with,” Jones said, before explaining that he was open to having his mind changed by the impending ASIC review into the Life Insurance Framework reforms.
Van Manen referenced the 2013 commission ban in the Netherlands, which the Dutch Financial Markets Authority subsequently found led to a decrease in advised insurance, increased underinsurance and only a marginal increase in the quality of advice.
“The Dutch regulators showed that if you, in the life insurance space, move to a fee-based model, people aren’t going to pay for that,” van Manen said.
“We know already that there is a resistance of people paying fees for advice with insurance, so we need to make sure there’s a remuneration model in place [so] advisers get paid for the very important work they do, and I think commissions is a key part of that.”
A July 2020 ‘CALI’ whitepaper sponsored by major insurers and advice associations noted that the Dutch market had the benefit of “strong integrated base and social insurance layers as well as other access options”.
In Australia, the whitepaper warned, a commissions ban would do even more harm to consumers and industry.
“An outright ban on commissions can be expected to accelerate the decline in life risk adviser numbers and coverage. As a result, its likely find is everyday Australians will not be able to afford to pay for advice…” it states.
Policy on hold
Van Manen’s endorsement of insurance commissions wasn’t given as Liberal party policy. Asked to comment on the MP’s stance, the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume said the government is waiting for the outcome of the LIF review.
“The Government will make a decision about life insurance commissions based on all evidence made available,” Hume told Professional Planner. “We will respond to the ASIC review once it has been completed and carefully consider alternative distribution and compensation models as well as look toward successful overseas examples.”
It should be noted that van Manen holds the position as chief government whip in the house of representatives – the person responsible for ensuring other coalition members vote according to leadership desires.
Much will likely depend on the outcome of the LIF review, then. Unfortunately for industry, ASIC hasn’t given an indication of when a report will be published after the pandemic’s early bite forced it to to delay data collection.
Given the six-monthly data requests were postponed until early 2021, it’s likely neither side of politics will find out whether the LIF reforms “have better aligned the interests of financial advisers and consumers” – ASIC’s stated intention – until the second half of the year.