FSC’s LIF approach dubbed ‘cartel’ behaviour

FSC ACCC cartel LIF

23 June 2016
| By Malavika |
image
image
expand image

The Financial Services Council (FSC) engaged in cartel behaviour when creating the Life Insurance Framework (LIF) as it was driven by the big banks and insurance companies, and the industry should have gone to the Australian Competition and Consumer Commission (ACCC) with the proposition.

Such was the argument by risk adviser group, the Life Insurance Customer Group (LICG), which said the FSC chose to force the LIF reforms through with scrappy legislation possibly because they did not believe they could satisfy ACCC scrutiny.

"If the FSC believes their own rhetoric about ‘churn' and ‘significant consumer benefits', and has sufficient evidence to substantiate their claims, why not go to the ACCC?" the group asked.

"Had industry gone to the ACCC with a proposition that could provide a better outcome for consumers, despite the negative impact on some industry stakeholders, such reforms could have been implemented a year ago?"

While cartel behaviour was illegal in Australia like price fixing, the ACCC could approve it if the benefits to consumers can be proved.

"Like restricting a competitive market by having all insurers reduce their otherwise varied pay rates to the same rate, at the same time on the same day. And all insurers implementing a common clawback arrangement on the same day at the same time," the group said.

The group, which includes Bombora Advice managing director, Wayne Handley, said the life insurance industry was sitting in expensive limbo as "common-sense, consumer-focused resistance" to poorly designed reforms had halted the passage of the LIF legislation through Parliament.

"The FSC has no data on which to justify their position, no rationale behind reducing remuneration to their recommended level, and no one has been able to specify one single benefit to consumers," the group said.

"There is no evidence of ‘churn'. No one has even defined ‘churn'."

Insurers paid $7 billion in claims last year, according to the Risk Store, and the group added clients needed advisers to help them get appropriate cover.

"These ‘reforms' do not address that, they threaten it," they said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

3 weeks 4 days ago

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

1 month ago

Interesting. Would be good to know the details of the StrategyOne deal....

1 month ago

Insignia Financial has confirmed it is considering a preliminary non-binding proposal received from a US private equity giant to acquire the firm. ...

1 week 3 days ago

Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses. ...

5 days 18 hours ago

Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equi...

4 days 22 hours ago