Mike Taylor leads a roundtable discussion about the challenges facing the insurance industry. Topics covered include underinsurance, reaching younger consumers and adviser commissions.

Closing the insurance gap

Mike Taylor, managing editor, Money Management: Insurance isn’t something that the average Australian embraces. And I know, from comments over the years, that it is something that is basically bought rather than sold.

But we continue to have an insurance gap in Australia, and people are heavily underinsured in spite all the publicity. So what has the industry got to do to put insurance back at the top of the agenda for the average Australian?

Phil Collins, IUS: Well, I’ve always had a strong view that the whole subject of superannuation, including insurance, needs to start with an education program.

Probably even at the last year of school. There is no way that we are going to get kids of that age excited about superannuation or insurance.

And I don’t think that should ever be our aim, but they will become members of superannuation fund once they get employment, and whether they like it or not they will have money diverted into that account, and from that account will come some insurance.

They need to have some understanding of the importance of those decisions and I think the starting point is to have some basic introduction to superannuation overall, and to insurance, and when it is important and why it’s important, what sorts of insurances there are and the fact that they’re in effect going to be paying for it anyway in most circumstances.

They are going to have some insurance. It is important for them to know a bit about it.

But you also move on to different responsibilities during life.

Trustees of super funds have responsibilities to look at their client base, their membership base, and look at what sort of insurance is right and wrong.

They should put their members in contact with financial advice – that includes insurance – and allow them to move through life in that way because it obviously doesn’t remain static.

There are, as you say, still huge underinsurance issues but there are a lot of people out there who have too much of one sort insurance or another.

So it is not only underinsurance, it’s the knowledge of the whole issue of insurance at different stages of life.

So I think it starts with education at a very early stage and then progresses, probably with education all the way through but at different levels and with different people involved.

Yolanda Beattie, Honner Media: Can I pick up on that point there because of the fact that there are different people involved.

I think that is where part of the education challenge comes in. And if you look at it, obviously the industry has put an enormous amount of effort and money and resources behind education.

IFSA [now the Financial Services Council] did it first and, as you say, the superannuation industry as well is doing more and more – but there are a number of other key stakeholders that could be better engaged to help spread the word, and I think one of those big opportunities is with employers.

I took my own personal experience of friends and family, who both had to make insurance claims against income protection.

One for mental illness and one for cancer: both women, under the age of 35. Not your typical entry point, if you like, into the product, but both had come through their employer and didn’t know they had cover until they got sick.

And so there is a really classic example where employers are already doing a lot out there to cover their staff and aren’t really educating staff about what the benefits are – whether they’ve got the right cover, if they are all doing that when it comes to superannuation.

Employers are a big opportunity in terms of doing more for education.

I agree that it should be happening at schools and I think there could be more done within insurers themselves to create a better leverage. The claimants are the best advocates for the product, and the best advocates to educate and raise awareness around the product.

You talk to somebody who has had a good claim experience and see how it has impacted their life and they are obviously the most powerful stories. So how the industry can better capture those stories and start spreading the word is a really important part of the challenge.

Tim Browne, CommInsure: I think the real heritage of the life insurance industry are the faces of those claimants. They answer your question.

We need to raise the industry’s profile through their stories, and we can do that by working with Col and with the RetireInvest advisers to form some sort of collection mechanism of those stories, and of that data, and then cascade that into the consumer space so that we can break down some of the perceptions that are out there and promote the good work that comes from great advice.

At the end of the day I think consumers take out insurance with a view that when something happens they get paid.

We need to collate those stories and cascade them out there. That’s a critical element and the more effective we can be at that, the more successful we will be and the more people will have insurance in place at the time of a traumatic event.

Col Fullagar, RI Advice: Well I’m going to rain on the parade a little bit. I don’t think the most powerful stories are the successful claims.

I think the most powerful stories are the problems that we have with claims because people are far more prepared to tell bad news stories than good news stories.

The major problem – which may even flow over to underinsurance – is people don’t trust insurance companies and, on some occasions with very good reasons because they don’t necessarily hold themselves fully accountable.

And if people don’t feel like they’ve been heard, if there’s a problem then they are going to tell everyone they can possibly get to – and I think that is one of our major problems.

Tim Browne, CommInsure: An extension of that, in a similar vein, are the people who have an event and don’t have any insurance in place.

And so, if we think about the stories that are compelling stories, I recognise what you have just raised Col, but equally I can think of personal examples where people have had insurance but weren’t aware of it.

I know of a couple of close friends who haven’t had insurance in place, and have experienced a traumatic event, and those stories, as well as the perception issues that you’ve raised, are stories that we need to get out there because, in the event that you’ve got insurance and there’s a payout then that’s a good story.

In the event that there’s a claim and it’s unsuccessful I understand the point that you’ve raised.

But for those people who have had an event, and haven’t had insurance, there are some more stories there about the underinsurance problem that we need to also get out and promote.

Phil Collins, IUS: I think that’s a real issue just on that. I agree with the points. Unfortunately, our industry has never helped itself by telling the stories outside of its own office.

We, for one company, I’m sure of the companies here have got plenty of good stories about claims being made.

We tend to use them ourselves; we don’t tend to, as an industry, disperse the claims – so people don’t get to know about them as much.

That’s probably also a bit true of the bad news stories, but the bad news stories are picked up by the press – so we have A Current Affair, or whatever it might be, quickly getting on to them and wanting to run them.

We are not doing anything to counter that, and it is difficult because they don’t want to run good news stories.

They say no one has an interest, so I think, I hear what is being said, and I agree with most of it and I just think it is a fairly big challenge to try and get the big picture, the good news stories, and there are plenty out there as an industry as a whole and make them interesting.

I mean who is going to read an article that says, “By the way, we made this claim,” and it’s, “Of course, that’s what you need to do.” That’s no big news. But if we don’t pay a claim it is all over the shop because we should have.

Andrew McKee, adviser, Australian Unity: Well, sorry, not always, they should have. I mean let’s be honest, sometimes people make applications for insurance and they have non-disclosed.

Marc Bineham, Association of Financial Advisers: But this is attitudinal. I agree entirely.

Andrew McKee, Australian Unity: So let’s be sensible there. I think there is another big issue around underinsurance as well, which is actually the confusion that people have.

I mean people I talk to have a sense about the need for insurance, and they are often positively inclined to taking out insurance, but they don’t know how to do it, they don’t know where to go, they don’t know how much they need – and even if they do know how much they need, it is complicated to go through the process and they never get around to it.

It is a complex product, it is a complex sale, and there is confusion for people and it is that confusion that in some ways, I think, causes the inaction on peoples’ behalf.

I think together with education to improve an understanding is great but, as an industry if we can help take out some of that confusion I think we will see better take-up rates. And that goes to the heart of advice and the affordability of advice.

Marc Bineham, Association of Financial Advisers: Andrew made the same point that I was going to make: the need to seek advice. If we are going to do it through education, I know that my own daughter is doing her HSC and they are learning about basic compound interest and mortgages.

There’s not a mention about insurance. They wouldn’t know what it is.

Like Yolande said about having it under the company fund: when you tell someone you have a group salary continuance plan, they look at you and have no idea what that is. We can’t even from the title make it simple for people. It just has to be simplified, so a lot of processes can be simplified by just getting the message out there.

If we understand it, then we can tell our children, just like we do when they get a car: you need insurance. It’s simple.

It’s understandable.

The policy might be complex but at least the basic premise of it is understandable.

You don’t have that with income protection, as you said, you may have the feeling of need for life insurance but we don’t have a grip on it so it is very hard for us to advise our children about it. For the general public, that education should start with school but it needs to be a simplified message.

Andrew McKee, Australian Unity: Well if you look at insuring a car, you know how much a car’s worth because of what you paid for it. But if you look at insuring a life, it’s a much more complex equation. There is an element of complexity.

Yolanda Beattie, Honner Media: And I don’t think it has to be complex for everybody. If you look at middle Australia, you look at insurance, there is your income and your debt – make sure you’ve got enough to cover those liabilities if the worst happens.

And for most Australians that equation shouldn’t be that hard. If you look at the channels that have been directed by all super, the process can be relatively simple for most people.

It’s when you’ve got more complicated assets and liabilities that the equation gets harder. So if we can’t even get that part right, the middle Australia part, it should be straightforward – and I think that’s where the other conversations happen.

I think superannuation, super fund group risk cover, that’s a really important part of that because it is a simple process and I just recently did it myself. It was one or two forms, and I don’t think I had to sign anything. I think it was just: go online, log online, and do it. It was super simple. But I know it gets more complicated.

Col Fullagar, RI Advice: Because the devil is in the detail, what I fear is that if it’s way too simple up front then when you come to claim, suddenly out pops this exclusion, pre-existing conditions exclusion, something like that. So it’s not just a matter of getting the advice process in place – people are going to have to engage. I think the advice process is pretty good.

I think part of the problem is the nature of the contracts, and the fact that the insurance companies have been driven by forces other than simply seeking to resolve the needs of clients and to provide tools for advisers to give advice, dare I suggest?

Andrew McKee, Australian Unity: That is a great point. How much of the complexity in the products is driven by consumer need, and how much is driven by the need to get research ratings?

Col Fullagar, RI Advice: Zero to one hundred.

Andrew McKee, Australian Unity: So clearly there are some product innovations that have been good for clients, but a lot of the complexity that goes into product is all designed around what research ratings you can get out of it and the result is you end up with a very complex array of products and it’s very difficult for any individual, and often any individual adviser, to really understand every product that’s available on the market.

Phil Collins, IUS: But even taking those points into account, I think that modern superannuation funds today do provide – albeit some with various conditions to make it more suitable to enter – very good cover, very good rates, that are very simple to most people.

Andrew McKee, Australian Unity: I think group is fantastic for a base level cover, but it doesn’t take into account the fact that everyone’s circumstances are different. Some people need less cover; they need to be able to opt out. Some people will absolutely need more cover

Phil Collins, IUS: But that’s only talking about probably at the full levels of cover, you can still do the extra through superannuation. I’m not pushing one camp versus the other. I’m just saying that I think there has been a move to try and simplify, and it’s probably brought in some of what you were talking about.

The bottom line is, as we talk about education and so forth, there are within most super funds now a huge range of ages and needs, and understandings of insurance.

You’ve got people from 16 to 70, all with different needs, all with different understandings of the issue. And in fact they are in different generations that will tolerate a certain type of education only within it. I mean Generation Xs and Ys, their hot buttons are not the same as a fellow like me.

So you need to approach the way you explain contracts, and the way you go about telling people about insurance, differently.

You know, younger people in Generation X and Y probably won’t fill out a form for underwriting of any sort no matter what. They will forgo the insurance before they do that.

Super funds have come to the stage where we say: 'OK. Rather than the old system where you cut off at a point, you don’t get any more insurance unless you provide your medical and health checks and your blood and whatever. We will give you options, and you can have this option here will give you full-cover subject maybe to an inclusion, or whatever, for something you know about for a short period of time.' 

At least it gets them full cover for most things straight away because otherwise they don’t get it, they won’t get it.

Selling insurance through the internet

Mike Taylor, Money Management: Which brings me to another question, and that is looking at some of the models that have been out there in recent years.

There has been an increasing use of the Internet and basically insurers with their products out there. I mean CommInsure has certainly used the Internet to its favour.

Tower has for instance. What is the future there? Is that a way of tapping into the market or is the need for advice there and does it happen sometimes?

Yolanda Beattie, Honner Media: I think it goes to that point that all channels have a place, and for those that don’t want to go to an adviser or don’t want to go to the super fund, a direct option may be suitable for them.

But obviously what happens with direct options is that the cost of cover you get under those scenarios is often much greater than what you get through an adviser.

So it comes to education and trying to somehow simply explain the different benefits of different channels, the cost of different channels that should be investigated by the consumer, but recognising that this is an Internet-driven business.

Most people do their research and calculate their potential levels of cut-off through the web, so doing more to use that channel to educate, to engage, is going to be critical.

Phil Collins, IUS: I think that’s a big opportunity to actually encourage members of super funds – and obviously I keep talking about that, but that’s my main area – but to use advisers with the latest changes in terms of intra-fund advice and certainly in our case developing systems that automatically give a member some indication of where his needs might be for insurance but then pushing back, if you like, to the funds advisers or to an independent adviser that he might have contact with.

Things like that can be quite helpful because they bring the member’s attention to an area that he might not have otherwise thought about.

They don’t follow through to force them into a product or anything else but they draw from the information that is already known about. So it might be time well spent to go and talk to an adviser and get some information about what you can do to assess the situation.

And I think that’s quite valuable, and something that we are trying to do.

Col Fullagar, RI Advice: What Dannie and I do as a couple, for example, is if we want to go on a trip, we would love the facility to go to a travel agent just say: “We want to go to Italy.”

The rest would be looked after and we know, we trust the person, they would do all the analytical work for us, the searching, and they’d come up with a good deal, we’d pay the cheque and away you’d go. Have a good time.

Ditto if you want a car. You want to go to the car dealer and feel that you trust them. A lot of what is happening with people these days is, I know Dannie does it, she goes on the net, she searches all the work sites, feedback sites and all that stuff on both cars and travel, and you name it, and then just walks in and says, “This is what we want.”

And when you are doing all that analytical work yourself I don’t know if you necessarily want to pay too much at the other end. So I think the dynamics of what is going to happen to financial advice is a little bit up in the air at the moment. I think there are changes that need to happen in a number of areas.

Yolanda Beattie, Honner Media: Wouldn’t you say that most advisers would be pleased if their clients were to become more informed, they’d done the research themselves, they’ve considered their level of cover, they were more able to have a conversation and you’re starting at a higher level?

Col Fullagar, RI Advice: I don’t know. I don’t give advice. I’m on leave. I’m with the FSL.

Yolanda Beattie, Honner Media: Theoretically though, all those that are in that advice camp that you would expect that advisers appreciate that level of knowledge?

Marc Bineham, Association of Financial Advisers: And they do. We do. I think the issue comes to that if you were single, if you were in your 20s and you were used to the Internet and you had just bought first apartment, you had a $300,000 mortgage and you needed to get insurance, and you did the research, that’s simple.

But once you have a child, mortgage, your spouse is now staying home to look after that child and you are responsible for that, it just gets that complicated and it might be that that person now needs $3 million of life insurance and they see the premium and say, “Oh my god. I’m not going to pay that.”

That’s when an adviser really needs to go and explain the reason why, the intricacies and the need for that because it’s an emotional decision.

So I think the smaller the cover, and when you have small levels of responsibility, the Internet, fine, but once just like, even Col was saying about travel, once it gets complicated, you can’t do that yourself.

Andrew McKee, Australian Unity: Yeah. I think when it gets complicated that’s also when people will want to go and see an adviser.

So there is real point where people say: “This is too hard. I need help.” And that line comes at different points for different people. So some people will do much more of their own work online and are happy to make those decisions online, and there are people who will never see an adviser.

But then you get other people who will say: “This is now too complex. I need help. I need to go and get an adviser.” And they will get them.

Col Fullagar, RI Advice: Or I’m too busy organising my travel and buying my car to go outside and there’s an adviser I can trust to do the financial advice.

Andrew McKee, Australian Unity: Whatever, but there is that complexity that comes in to it and the line is drawn at different points for different people about when it gets to a point that they will want to see an adviser.

Marc Bineham, Association of Financial Advisers: As long as the Internet doesn’t make it too easy for them to say: “I’m not going to get an advisor, I’ll do it myself,” and they don’t realise they are underinsured, or they think that’s enough. “You know my wife doesn’t need to earn a million dollars.” Or “My husband doesn’t need to earn a million dollars.”

And that makes it a bit too easy, or they just see the expense of that and they don’t have someone explaining, helping. There are lots of people who could fall into that trap.

Yolanda Beattie, Honner Media: And that’s already happening.

Andrew McKee, Australian Unity: I was going to say, that can happen now. You know the keys, from an adviser’s point of view, and from the advice sort of industry’s point of view is to keep encouraging people to understand the value that advice can generate.

Be that on insurance or investments or super, it doesn’t matter, but encouraging people to understand that there is value and that if they have any concerns that they should at least go and talk to an adviser.

Tim Browne, CommInsure: I think it is horses for courses. Underinsurance is a national problem and some Australians don’t want a relationship with an adviser.

I think that they get the best outcome with having that relationship with an adviser, however some Australians don’t want to do that and they will be using the Internet to put insurance in place.

So I see that there is a role for it, and an important role, and it will be part of the landscape in the future.

Marc Bineham, Association of Financial Advisers: I think if we do get together from top down, some of the employees at the last May budget Chris Bowen got up there and spoke and he said: “Well if I actually had $5,000 to spare and I knew to go and get my insurance looked after or take my family to Disneyland, I’m going to take my family to do Disneyland.”

We really have a problem because he should be going out there and saying, “Everyone needs to have an appropriate level of cover and should be seeing an adviser.” That’s the message that should be going out, not: “I’d be taking my children off to Disneyland.”

Yolanda Beattie, Honner Media: Not to mention that the Government may come up with a genuine education campaign. Now you look at the money that’s been thrown at super over the last couple of decades and it’s been huge.

And what a challenge that has been despite the money that has been thrown at it to get it into mainstream consciousness, of being aware of what your super fund can provide you and being prepared for retirement and adequacy and all those issues.

That just typifies the challenge that you face in long-term planning for consumers, because they just don’t think long term. But having a genuine Government commitment to be part of the education effort is really needed and doesn’t seem to be on the agenda.

Col Fullagar, RI Advice: I’d be fascinated as to why Bowen gave that answer. I would be fascinated because it could be driven by any number of things so that the answer doesn’t worry me too much, but the reason behind it would be very, very interesting because I think a lot of people would say exactly the same thing.

Yolanda Beattie, Honner Media: And that goes back to the point that I was just making then. It is about shifting priorities and a lack of wanting to commit long term.

Human beings are pleasure cravers, you know, we look for immediate satisfaction. We are looking to plan for the holiday in three months time; we are not looking to plan for the future in 30 years time.

Phil Collins, IUS: Yes that’s true. You buy your car because it is there and it looks good and you want it. You buy a washing machine because you need it. You’ve got no choice. Insurance you can put off.

Yolanda Beattie, Honner Media: But insurance is in many ways the most materialistic choice that you can make because it is saying that the material assets that I have, and my ability to fund those, are important for my lifestyle.

Phil Collins, IUS: I know, but you can’t touch it and feel and have fun with it. Drive around the block and show your friends.

Col Fullagar, RI Advice: And you need to insure your home and your contents and your car.

Marc Bineham, Association of Financial Advisers: That’s right. That’s always logical.

Genetic testing

Mike Taylor, Money Management: Another topic that I’d like to hear your thoughts on is genetic testing. Genetic testing is now being thrown up as something insurers should be taking into account. What’s the view of the panel on that?

Phil Collins, IUS: My comment on genetic testing is that when it becomes a science that we accept in terms of its accuracy and consistency, I don’t see there is any reason that the industry shouldn’t take it into account and I don’t see any particular reason that people should be concerned about it.

It really doesn’t make much more difference than the sort of medical tests we have available to us now that we didn’t have 30, 40 or 50 years ago.

We ask someone to go for a medical today and we can do all sorts of things that weren’t possible in the old days. There is a decision to make after that about the insurance and insurance rates.

It may, or may not, have an effect but I can’t, frankly, see that we are way off it yet before we get to the stage where we are satisfied with things.

I think in time it probably will become something we can rely on, and it won’t mean people can’t get insurance necessarily, any more than some people can’t get insurance today. But I don’t think you can prevent new developments of this sort filtering into the industry.

Col Fullagar, RI Advice: I think the potential is that as they develop genetic tests to identify things, they will also develop changing genetics so that they can cure them at the same time.

Phil Collins, IUS: Exactly, and as I’ve said on this subject before, people do lose sight to some degree of the fact that insurance companies are there to insure people and they make money out of insuring people, not knocking them back.

And really if you look at the acceptance rates (which have to be aired with claim rates as well), the number of people who apply for insurance and are absolutely unable to get it is very, very small. And the rates in this country and throughout the world are pretty competitive.

I don’t see that altering because of genetic testing.

Yolanda Beattie, Honner Media: But I think it is a question of disclosure and I think it is like with everything (like whether you get disclosed that you smoke) you have to disclose previous conditions. If you are aware of a condition that you know will affect your insurability and they think: “I can understand the requirement to have an obligation to disclose that.”

What is critical though is when you are doing a genetic test, or you go to do that, you might not be aware of what impact that is going to have on your insurability in the future.

I think that’s where disclosure needs to be increased – not that I’m instantly familiar with what disclosure is at that point – but I imagine it’s probably not as obvious as it needs to be.

So when you are signing off to have that genetic test and get that finding you are clearly told: “The results of this will affect your insurance one way or the other. Either positively or negatively.”

And so people, to sign off on that and be aware of that before they undertake it I think is the critical step. And to make sure that there is not that rude shock when it comes to actually getting insurance and finding that main reason why you need it you can’t get covered for it.

Andrew McKee, Australian Unity: Well I think that is a great point for people who are going to a genetic test for some medical reason, which happens, and absolutely if they find out about something and they are applying for insurance, they have to tell the insurer about it, at the moment. In terms of widespread genetic testing, it is part of the underwriting process.

That would be a PR nightmare to introduce for the industry, which could only mean pain for the foreseeable future. At some point it might become more mainstream, like a blood test is now. But it is not now, and it is not in five years. I don’t know when it is but it some time away before it is not a PR nightmare.

Col Fullagar, RI Advice: It could only enhance the reputation that insurance companies already have.

Marc Bineham, Association of Financial Advisers: And it’s an evolving thing, and it’s definitely that we are looking at your lifestyles. Twenty years ago we didn’t have smoker/non-smoker rates, and so we encourage people to be non-smokers.

It is reflected it in the insurance premiums to help your lifestyles.

We want to be more about prevention rather than reacting to when they do have health problems. So even in health, insurance companies are going to reflect that lifestyle anyway, of society.

Tim Browne, CommInsure: We are keeping a close watch on genetic technology but it is a watching brief. We adhere to IFSA’s agreed principles around it, but our view is that the environmental factors are at least as significant.

Things like smoking, exercise and those sorts of things – that’s what we are familiar with, and that’s what consumers understand, so it is a wait and see.

Commissions in insurance

Mike Taylor, Money Management:  One big question that seems to be causing a great deal of excitement out there in adviser-land is commissions, and whether in fact insurance is a product, or whether it’s the giving of advice – because that seems to be how it’s being considered in Canberra. So, are insurance commissions valid?

Marc Bineham, Association of Financial Advisers: Well from the AFA’s (Association of Financial Advisers’) point of view, and myself as an adviser, I am worried where it is going.

It’s people who are being advised out there because we do have a lot of clients, we are transparent in what fees we charge so the client does not go ahead and sign off until they actually know exactly what we are paid.

So the clients are aware of how we get paid and whether it’s a fee or a commission. The biggest issue for me in the last 20 years was that we wanted to be transparent.

We now have that and so I think to me it’s cool that we need to be promoting advice.

There are a few groups out there that have their own sort of interest to actually beat up the commission, but as for fees I have no problems.

I think some parts of the business should only do fees, and some parts should only do commission. It’s just whatever the appropriate requirement, as long as the client gets to decide, I think that was the big issue.

As long as the client has a choice, as long as the client knows about the fees, or the commission that is getting paid, and agreed to it, I think to me that’s the end of discussion.

OK, it’s not, unfortunately, the way it is but I do think we are moving away from the fact that advice is the ultimate thing. This ‘fees versus commissions’ is a bit of a sideshow and I am worried about the direction it is going in.

Col Fullagar, RI Advice: Should the client be given the choice to go to a business that charges fees versus a business that takes commission, or are you saying that the client should go to an adviser and dictate to the adviser whether or not they charge a fee or take commission?

Marc Bineham, Association of Financial Advisers: No, I believe it is just choice – that the clients have choice.

Col Fullagar, RI Advice: Yes, but I think a client should have the choice of choosing a business that will either charge fees or take commission.

Phil Collins, IUS: Absolutely.

Col Fullagar, RI Advice: But the client shouldn’t have the choice to dictate to the individual adviser: “You can’t take commission, you must charge me a fee.” Because some people are saying that I should have a choice at an adviser level, forget it.

Phil Collins, IUS: We don’t deal in that market at all in the company I represent. So I’m quite objective in that regard. But I agree entirely with Mark.

This whole argument got off the rails somewhere. Probably vested interests. I think what you are saying is right if I understand it. As far as I’m concerned, whether you pay by commission or a fee is not really the issue. It is transparency, openness and choice by the client.

As long as those things are there, as long as the client knows, there are plenty of clients that probably are quite happy.

They probably prefer to have an adviser take a commission as his form for remuneration than to pay a fee and if that’s their choice, what’s wrong with that?

I can never quite understand the thrust of the argument. I mean I have a financial adviser and I’m quite happy for him if he doesn’t [take a commission], he never has, but as long as I knew what was going on, it was all open to me and I had a choice. I don’t have any problem with that.

Yolanda Beattie, Honner Media: I think that comes to conflict of interest doesn’t it? It’s where the whole commission thing comes from.

If you’re getting paid a commission to invest in an investment product, you’re conflicted because you are not necessarily putting the client in the right product.

But when it comes to insurance, that conflict can possibly be in the worst-case scenario.

The client ends up overinsured or they go into a more complicated product that pays a bigger commission.

So if you look at, I think it’s got to be down to what the potential downside risk is as a result of that conflict. The conflict isn’t as inherent in insurance products as it is in investment products. The two are really different.

Col Fullagar, RI Advice: Tragically the conflict can exist. And it’s called ‘journey’ and the way to knock it on the head is for the insurance companies to pay commission not just on the introduction, new premium and the retention of old premium, but to start to reward behaviour such as the retention of premiums over the long term, the fast completion of business, and the high completion rate of business.

There are a number of other areas where the insurance company could reward appropriate behaviour and you’d get rid of most of the problems that are causing the concerns about commission.

Tim Browne, CommInsure: We believe if commissions are banned it will be counterproductive because it will compound the underinsurance problem.

Why?

Because we believe that if consumers are forced to pay fees for insurance, they will chose not to and that will lead to clients not having appropriate insurance in place at the time of the claim.

It will lead to the Government having a social and economic problem on its hands.

That’s why we don’t believe commissions should be banned. It’s pretty straightforward. But for those groups that have had ongoing experience of dealing the clients, we quickly arrived at the position that clients will be reluctant to pay for that advice.

And so the Government is rightly concerned about the access to advice, is rightly concerned about underinsurance, but banning commissions on insurance, I think, is going to have unintended consequences – that is, underinsurance.

Col Fullagar, RI Advice: I quiver at the thought of an insured individual going up against an insurance company without some form of organised representation – and don’t mention FOS [the Financial Ombudsman Service].

Tim Browne, CommInsure: My view is that the best outcome involves an adviser, so we should be strengthening that relationship.

That way, in the initial phases the right amount of cover is going to put in place and, at the time of claim, there will be someone there to help the client through the claims experience.

Insurance groups are genuinely committed to paying authentic claims, and we have paid half a billion dollars over the last 12 months. Col, you might see things differently, but we have paid half a billion dollars over the last 12 months.

Col Fullagar, RI Advice: That’s the price of entry. Come into our world and see the ones that aren’t paid.

Marc Bineham, Association of Financial Advisers: In the last eighteen months we have tried to get a lot of political engagement, and one of the easier stories on commission is the issue that the politician we would sit down and talk with would say: “Why don’t you charge fees? Doctors, lawyers and accountants all charge fees. If you want to be seen as a professional organisation you need to charge a fee.”

And I said: “Yes, but every one of them can provide you something for that fee. For insurance we would still have do our needs analysis, client data, write the report and then charge you a fee if this was the way we did it, and it could come to $1,000.”

And they say: “Yes, fine, but say you find out for some reason I have a health problem and you can’t provide me with insurance.” And I say: “We still need our $1,000 paid.” And they say: “But you haven’t done anything for me. I haven’t got any insurance. I’m sorry I’ve got a health problem!”

So there is difference.

We can’t guarantee that we can always provide you an end result, and yet most fee-driven occupations can provide an end result.

We can do all this work for you to fulfil our $1,000 fee but not do anything if you have got a health problem because you are uninsurable. And it is one of the problems that we find, and when we explained that to the politician they sort of understood. That’s part of education as well.

Phil Collins, IUS: Yeah I think that’s valid. I mean it always strikes me as somewhat ironic, humorous or whatever, I mean you don’t go in to buy a washing machine at Harvey Norman and ask, “What’s the price without their commission?”

Which would probably be about half the cost because there is at least a 100 per cent mark-up. And so I want it for that: “I want to pay a fee for your advice on a machine or whatever.” You can’t do any of that.

I mean you buy a car, you buy half the things in our world and they include large amounts of commission and we don’t think anything of it, or we don’t complain about. It comes from insurance and people now move into: “I want to know exactly what the figure is. Take it out if you can”.

I think Mark is right and that’s one of the difficulties with it. The truth of the matter is it’s become a problem in a sense because of – I won’t say rorting – the extension of commission payments to areas where probably it can look very difficult to justify.

And when you get trading commissions on portfolios of business investment size that amount to large amounts of money, then if they are investigated that looks a bit tricky, a bit hard justify, so I think that flows through but in the normal course of it I think it is very reasonable.

Andrew McKee, Australian Unity: If we move to a no-commission environment it is absolutely going to increase the underinsurance issue.

Yes, commissions can lead to conflicts like overinsurance, but there is a natural brake on that because people still have to pay the premiums – that is, people still have to hand over the money if they are going to get overinsured.

Yes, there’s fine tuning but there might be other ways to solve the conflicts. But if you have a no-commission environment it is going to increase underinsurance.

So the negatives far outweigh the positives I think. What really concerns me at the moment is that Cooper’s coming out and saying: “No commissions within super for insurance. But outside of super you can have commissions.”

And that’s where, if you have got a non-level playing fields, you are going get commission if you write it outside super but you are not going to get a commission if you write inside super.

It is going to be hard for an adviser because there will be a much larger conflict potential in that environment. I think it has to be a level playing field within super and outside super.

Col Fullagar, RI Advice: And they will be forced to charge a fee at the point of claim because there are material differences between superannuation products and the retail product.

And don’t start me on Cooper, because he wants to take the heart out of superannuation as well and then we will be in big trouble.

Andrew McKee, Australian Unity: Well it has to be an insurance roundtable, Col and we won’t be going there.

Col Fullagar, RI Advice: I just hate to have everything directed to that extent, everything brought down to the same common denominator.

You know advisers have different business models, they provide different levels of service and so on, they should be allowed to be remunerated differently.