Insurance sector challenged to sacrifice status quo
The author of the Trowbridge Report, John Trowbridge, has challenged the life insurance sector to be prepared to sacrifice the status quo to avoid further problems, and to create new opportunities within the space.
Speaking at the Money Management Thought Leadership breakfast in Sydney this morning, Trowbridge called for the life insurance sector to seriously address his recommendations or be saddled with conditions unacceptable to most participants.
He said if the recommendations in the report are not substantially adopted then the sector would be stuck with level commissions or no commissions on life insurance sales.
Trowbridge said he had proposed a model which had come under heavy criticism, but most of the comments had come from advisers and not other parts of the sector.
"I have seen little comment from insurers and consumers groups with only the Asssistant Treasurer contributing his view," he said.
"I have not seen any other suggestions about a fee model but rather complaints we are messing up the advice industry. The debate should be around the quanta involved and not around the model suggested."
Trowbridge said the suggested IAP and level commission model would eliminate up front commission conflicts, which was the piece of the current model that had to be dealt with first and would require insurers, advisers and licensees to take the first steps.
Trowbridge said the package of recommendations in the report can't be pulled apart and adopted piecemeal and it was expected that some people would accept parts and reject others.
"That was always going to be the case. How could consumers be satisfied with the report if advisers got what they wanted and how could advisers be happy with the report if insurers got what they wanted? How do we satisfy all these different interests?"
"What are you prepared to sacrifice from status quo to create opportunities and avoid further problems in industry?" Trowbridge said.
Trowbridge also echoed the repeated the calls of Assistant Treasurer, Josh Frydenberg, for the industry to act, stating the Federal Government, The Federal Treasury and the Australian Securities and Investments Commission (ASIC) would work in concert to impose a solution if one was not found.
"ASIC is the key. It put out a report and is expecting an industry-based response," he said.
"If the industry tries to put it back to the Federal Government and forces it to act, the government will have to think about what it wants and will have the Labor Party and the Senate to deal with in reaching a solution."
AUTHOR
Jason Spits
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
