FMA says it's not lobbying for ban on life insurance commissions

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Financial Markets Authority chief executive Rob Everett has reminded a select committee that, while the Government appears set to clampdown on adviser commissions, that wasn’t the automatic conclusion of the report into the life insurance sector.

Tuesday, February 26th 2019, 2:00PM 2 Comments

He appeared before the Economic, Development, science and Innovation Committee.

It comes after the Reserve Bank and Financial Markets Authority released the results of their conduct and culture report into life insurers, and the Government announced a planned crackdown on incentives that created poor customer outcomes.

Commerce Minister Kris Faafoi has said that is likely to include high life insurance upfront commissions and overseas trips.

But the FMA has since worked to clarify that its report was primarily on insurers and their processes for managing conduct risks, not the advisers.

While the FMA has previously raised concerns about some aspects of commission structures, the report only said that commission structures and volume bonuses should be reviewed to ensure they were incentivising intermediaries to deliver good outcomes.

Everett was asked by National MP Paul Goldsmith at the select committee whether he wanted all conflicted advice banned.

“Our recommendation in the report made a distinction between sales incentives that are offered by employees of whoever provides the products, where we were pretty tough, I think, on saying that we thought volume-based sales incentives should be removed,” Everett said.

"As you know, advice is more complex, because people, where people are buying products through an advice channel as opposed to directly from the provider, which generally speaking should be a good thing, people don’t like to pay up front for advice. So it puts you in a position of having to look at the structure of remuneration for the advisers that would be different than in an employed environment.

"And that is complex, it was a big part of the debate on the financial advice bill, and our view as stated in the report is that, we want product providers to work very hard at structuring commissions and other incentives for advisers so that they respond to the needs of the customer - we’re not advocating they be banned altogether.”

Tags: Commission FMA

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