Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The shadow minister. Thank you. I appreciate the interjection.

First of all, this bill does not guarantee that new standards will be enforced. It also does not address concerns with the way the life insurance industry handles claims. It does address issues of conflicted remuneration for financial advisers selling life insurance products, but it ignores extant concerns about conflicted remuneration for claims handlers, who have a role no less important than that of financial advisers, since they are required to make fair and appropriate decisions about the merits of a life insurance claim. So, I note with some disquiet ASIC's recent report demonstrating that at least two life insurers were still paying remuneration with incentives based on how many claims were denied.

Finally, the bill as a whole does not seek to remedy the clear cultural and operational concerns that have become obvious and destructive within the banking and financial services sector. Nonetheless, Labor will support the modest reforms in this bill in the hope that they can improve consumer confidence in the quality of financial advice on life insurance. But we do note that this bill stops short of the recommendations of the Financial System Inquiry and the Trowbridge review to remove up-front commissions. The package still allows for up-front commissions but caps them.

Unfortunately, because the start date has been pushed back from mid-2016 to the beginning of 2018, the 60 per cent cap will not be reached until 2020. This is a long lead period for a modest reform that was agreed to by industry in 2015. Had the government been well organised to progress it, the bill could have been law well before 1 July 2016.

In addition to the limits on the quantum of up-front commissions, the package introduces a two-year 'clawback' of up-front commissions. This means that up-front commissions will have to be paid back to the life insurer by the financial adviser in the event that the policy lapses. It will not be until 2020 that these reforms are fully implemented. We think that the ASIC review, now scheduled for 2021, will be important in making sure that these reforms improve consumer outcomes.

We welcome the implicit endorsement of the Future of Financial Advice framework from those opposite that this bill represents. It represents steps to better align the standard protocols of financial advisers with the interests of consumers, and it addresses concerns about advisers 'churning' clients through products. Labor will help the government pass this bill and we will watch carefully as it is implemented. We will also scrutinise the bill as it begins operation and look forward to ASIC's review at the beginning of the next decade.

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