Insurance commissions ban a bridge too far
The industry super funds are the big winners from the inevitable ban on financial advice commissions, but now it's time for the industry to move on, writes Mike Taylor.
There is no more reason to ban commissions on the sale of insurance products than there is to ban commissions on the sale of houses. Both are products that can and are purchased in comparable markets and at the absolute discretion of consumers.
That the banning of insurance commissions is being discussed at all is not a product of consumer injury or particular evidence of grievous mis-selling. Rather, it is a product of the highly successful advertising and lobbying campaign underwritten by industry superannuation funds.
What is more, these are the very same industry funds that benefit from the product manufacturer largesse that flows from the granting of group insurance rebates.
Much has been made of the Cooper Review’s recommendations with respect to commissions attaching to insurance related to superannuation but, as was the case with the Ripoll Inquiry, the Government has appeared very reluctant to pick up on the notion.
There is a very good reason for the Government’s reluctance — the absence of compelling evidence of wrongdoing and the complexity of the environment it would ultimately be creating.
Then too, there is the reality that commissions related to the provision of financial advice are very different to commissions related to the sale of products that can and are easily obtained by individual consumers without any reference to an intermediary.
Australia continues to suffer a problem with respect to underinsurance and while superannuation funds may seek to claim the high moral ground, it has only been in the past half decade that many have seen fit to upgrade their offerings in a manner capable of adequately addressing the insurance shortfall.
Funds such as REST are, with their insurer AIA, to be commended for the flexibility and accessibility they have offered their members, but these efforts still fall well short of the customised solutions available to those who choose to use advisers.
In truth, the average person living in Sydney and relying on the life cover provided by their superannuation fund will not leave their family sufficient to cover the cost of the average Sydney mortgage.
Equally, while many funds today offer their members excellent income protection and total and permanent disability cover, too few of those members are sufficiently engaged to avail themselves of the benefits.
The Labor Party has delivered the industry funds a great deal during its first term in Government, not least an end to commissions with respect to financial advice.
The industry has broadly accepted the inevitability of that change and moved on. It is now time for the polemicists to be satisfied with their victory and to also move on.
AUTHOR
Mike Taylor
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