Submission: Interim report on Retail Life Insurance Advice

Consumer Action, Financial Rights Legal Centre, Choice and Maurice Blackburn Lawyers have provided comment on the Interim report on Retail Life Insurance Advice.

In brief, the submission argues:


  • We welcome the interim report’s recommendation to remove full upfront commissions and comments that the life insurance industry takes the problems with commission-based selling seriously.
  • However, we do not think the report has taken the problem of commission sales seriously enough, and we are disappointed that all remuneration options considered are commission based.
  • We do not agree that commissions are necessarily required to sell life insurance advice. The challenge of moving away from commissions is a problem with the culture of advisers, not necessarily a problem with consumers.
  • We acknowledge that the remuneration options must be considered in the context of improving the underinsurance problem in Australia.
  • We recommend that the final report consider non-commission based remuneration options in more detail.

Code of practice

  • We strongly support the development of an industry code of practice that is approved by either ASIC or the ACCC.
  • A code should be developed in compliance with the guidance in ASIC Regulatory Guide 183, and through an open, consultative process.
  • A code should set standards for the entire industry (including insurers, licensees and advisers, with additional tailored standards for licensees and advisers).
  • A code should deal with selling practices, claims processes, dispute resolution and compliance.

Quality of Advice

  • A well designed ‘standard cover’ regime will offer part of a solution to the concerns about quality of advice raised in ASIC Report 413.
  • We are concerned that Approved Product Lists will tend to limit effective competition and mislead consumers. We are especially concerned about the continuing practice of vertically integrated advice whereby advisers recommend investment products of entities to which they are associated to the exclusion of better performing non-affiliated products.
  • We have made recommendations to respond to the problems caused by vertical integration.
  • We support the adoption of ASIC’s Life Insurance and Advice Checklist by the life insurance advice industry.


  • The over-elaboration of compliance requirements has resulted in economic risk shifting from the providers of financial products to consumers. There has been no consumer testing of whether current Statements of Advice (SOA) are effective, and significant risks are not adequately explained to consumers.
  • A short form SOA should be developed as an industry standard through a consultative process and informed by consumer testing.

Product Offerings

  • ASIC report 413 suggests that stepped premiums lead to consumer misunderstanding about how the cost of insurance will increase over time.
  • We suggest that the industry could develop standard modelling software (in consultation with ASIC) which can be used to explain the differences between stepped and level premiums over time while giving advice.

A full copy of our submission is available by clicking: Interim report on Retail Life Insurance Advice.

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