LICG tells govt to drop “ill-informed” LIF

21-Jul-2016

By Jerome Doraisamy

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The proposed life insurance framework (LIF) reforms were “classic short-termism” that had no identified positive outcome and needed to be seriously re-examined by the federal government, according to the Life Insurance Customer Group (LICG).

The lobby group this week said the new government should focus on moving forward with essential life insurance industry reform as Australians were sick of short-term political manoeuvres.

“This election outcome shows that Australians are looking for a government that works collaboratively and with true consultancy for a future built on strong, big-picture, considered, evidence-based policy,” the LICG said.

“The government must look at all the evidence and notice where there is no evidence before reintroducing this ill-informed legislation.”

Chief among the concerns of the LICG is the assertion that there is a lack of empirical evidence of value in the proposed remuneration reforms, and that if legislated as currently proposed said reforms will serve to benefit Financial Services Council (FSC) members, while being detrimental to many consumers and independent advice businesses.

An LICG spokesman told financialobserver the group believed the legislation in its current form offered no benefits to consumers as it would lead to more independent advisers going out of business and thus less choice for consumers.

“We’ve repeatedly asked the FSC to indicate what consumer benefits are involved and on no occasion have they been able to articulate this,” the spokesperson said.

“FSC members have been responsible for major failings in the financial services industry [and] have not been held to account by the FSC board or government, despite many inquiries.

“We urge the new government to be sure the FSC is deserving of the trust put in them in allowing them to drive the LIF reforms, [and] look for the reasons why the FSC, with their deep pockets and lobbying expertise, relentlessly calls for the LIF legislation to be rushed through.”

The lobby group argued the government must better question the supposed benefit of the proposed reforms to consumers, why the FSC would prefer to legislate reform rather than subject the industry to review by the Australian Competition and Consumer Commission, the failure to address the problem of churning, and why the quality of life insurance products was protected from consumer scrutiny.

At the very least, the group said, the government should wait for the outcome of the Inquiry into the Scrutiny of Financial Advice, which would look at the whole life insurance industry, before proceeding to reintroduce the LIF legislation.

The LICG spokesman said: “No evidence has been produced by the FSC and so it would be folly to legislate reform while there is another inquiry going on.”

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