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Insurance commission disclosure must go, industry tells Dalziel

Insurance advisory industry bodies may withdraw support for the proposed financial intermediary legislation unless the government removes the requirement to disclose life insurance commissions.

Tuesday, August 21st 2007, 2:54AM

by David Chaplin

In a meeting last week a joint industry party, comprising members of the Life Brokers Association (LBA), the Professional Advisors Association (PAA) and the Institute of Financial Advisers (IFA), presented Commerce Minister, Lianne Dalziel with a briefing paper detailing why disclosure of insurance commissions was unnecessary.

While the paper supported the broad thrust of the proposed financial intermediary legislation, including disclosure of remuneration for investment products, it says disclosing insurance commissions could damage the industry - forcing risk advisers to exit and exacerbating New Zealand's under-insurance problem.

"However well-intentioned the proposed disclosure of actual remuneration might be, it is based on an assumption that all financial service product groups are the same," the paper says. "If not revised for life insurance, this has the potential to turn the tide of the life insurance industry from one of support to one of opposition to the regulations."

Dave McMillan, PAA chief, said while the meeting went well it was difficult to gauge whether Dalziel would be prepared to back down on disclosure of risk commissions contained in draft proposals for financial intermediary legislation.

Dalziel told ASSET magazine in July that she didn't "buy" the arguments that insurance commissions should not be disclosed.

"We are sending a summary follow up letter and awaiting a response from that before we determine what further action to take. At the moment all we can report is that the meeting was positive and that discussions are continuing," McMillan said.

A final draft of the financial intermediary law could be in Parliament by December this year and is expected to be passed into law before the 2008 general election. Dalziel told ASSET in July that adviser regulations would be in place by 2010 at the earliest.

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