Shadow assistant treasurer and shadow minister for financial services Stephen Jones reaffirmed his view that insurance commissions are inherently conflicted and should be banned at the AIA 2021 Adviser Summit digital conference.
Answering questions during a fireside chat with conference host Andrew Klein, Jones took it upon himself to frontrun any questions about the Labor party’s stance on the issue.
“I think Ken Hayne used the analogy that you can’t stand with one foot in one canoe and the other foot in another canoe, you’ll end up in the water. And conflicted remuneration is a problem, that’s the position I start with,” Jones said.
“Now there have been sectors in the industry – mortgage brokers have been pointed out – who’ve been able to make the case for an exception to that,” he continued, before bringing up the corporate regulator’s scheduled 2021 review of the Life Insurance Framework reforms.
“ASIC is doing a review and I’m not going to pre-empt the result of the review. I said to risk advisers around the country if they can make the case as to why that starting position I’ve got is wrong then I’ll listen to it but I’m not going to state a position on any of those things till I’ve got the ASIC review.”
The remarks echo Jones’ comments at the Association of Financial Advisers’ national conference in October last year, where he signalled Labor’s preference to abolish insurance advice commissions if elected to federal parliament in 2022.
“I’ve got to say I start with a bias against it,” Jones stated then. “The burden lies upon the industry at large to prove that a commission-based sales model that’s attached to an advising sector is able to provide a service to consumers that is not conflicted… I think that’s an enormous challenge.”
Jones made it clear there has been no change in this mindset in 2021
“It’s pretty clear to me that if your getting a payment from the product manufacturer then there is the potential for your interest to lie with the insurer and not the insured,” he said.
Mr Jones says “It’s pretty clear to me that if your getting a payment from the product manufacturer then there is the potential for your interest to lie with the insurer and not the insured”. Is he unaware of an adviser’s best interest duty?
Like many advisers I have little interest in writing new risk business as it’s frequently uneconomic, though I will do to help clients with broader needs.
The unintended consequences from some of the Hayne “reforms” are already hurting many of the people Jones would wish to help. Unfortunately, he doesn’t seem to be listening or observing what is happening in the advice marketplace.
Well said Christoph! This Jones guy is amusing. The industry has come back & is continuing to come back with legitimate reasons why commissions need to stay, particularly given that there is no workable alternative. How can there be a conflict in receiving commissions when all insurers now have identical commissions structures? The Labor party are more concerned with winning the debate as opposed to listening to the facts!
Stephen Jones is on his soap box drumming up some recognition.
He cannot be so out of touch, which leads me to believe he is creating his own platform.
ASIC have never understood the intricacies of the Life Insurance Industry, so his passing the buck to them for guidance, is akin to asking a GP for his expertise on intricate brain surgery.
Stephen Jones is like all Politicians who like the sound of their own voice and whom, wish to let the world hear them, by creating words that will not clearly articulate the issues, or any answers, though leave room for many further questions, which he will be very happy, to once again, climb the lofty soap box and be verbose.
After more than 10 years of putting up with a congo line of Politicians, Public servants and vested interest groups who still continue with platitudes and little substance, it is time to stop the merry go round and demand action that will actually allow the Industry to recover.
What I find most astonishing is that the life insurance companies are not making their case.
Removing commissions will crater their new business revenues.
It will take life insurance advisers out of writing new business except for the wealthy.
It will bring in a whole new set of online life insurance offers of the type of insurance that was incessantly advertised on pay TV. There will be lots of fly-by-night operators who will avoid the licensing requirements, for example by just being referral agents or will simply be illegal or operate from offshore either as agents or insurance companies or both.
Once you make it practically impossible to provide for a need legally, it will be provided for illegally.
Insurance companies could:
• Make their case for survival directly to the media;
• Give speeches at all relevant conferences outlining the consequences of a ban on commissions;
• Do thorough research on what clients would pay for life insurance advice as such research in the past showed that clients are ready to pay far less than it costs an adviser to provide insurance advice;
• Do high quality analyses of other countries that went through a reduction in commissions;
• Compare such countries to countries with stable commissions;
• Do a high-quality econometric analysis of the long-term consequence in new life insurance business reducing by 20%, 30%, 50%, 80%, showing:
o The consequences to individuals and families who have little or no cover compared to those that do when there is a death or serious accident or illness;
o The consequences for the tax paper in such a case;
• Engage in substantial lobbying, which doesn’t seem to be the case at all at the moment.