MJW fallout unexpected
One of the actuaries who prepared a controversial report into insurance commissions says he was surprised by the industry fallout from it.
Friday, March 11th 2016, 10:39AM 
8 Comments
by Susan Edmunds
David Chamberlain
MelvilleJessupWeaver (MJW) prepared a $200,000 report for the Financial Services Council which claimed that high upfront commissions were creating poor outcomes for consumers.
It called for limits to be imposed.
After the report was released, insurers that distribute via third-party advisers - AIA, Partners Life, Asteron life and Fidelity Life - resigned from the Financial Services Council.
Its chief executive has since been made redundant and the association is reassessing its future direction.
MJW actuary David Chamberlain said the reaction was not what had been expected.
"We did not anticipate the actions that followed publishing of the report."
But he said it seemed likely that New Zealand would follow Australia's lead to regulate insurance commissions.
Australia's new laws, which will take effect on 1 July 2016, include a three-year phase-down of upfront commissions paid to advisers to a maximum of 60% from 1 July 2018, together with the introduction of a maximum rate for ongoing commissions of 20 per cent; and the introduction of a two-year commission clawback period, which will claw back 100% of a commission in the first year and 60% of a commission in the second year should a policy lapse.
"You have to suspect that they will flow here," Chamberlain said. "How it would be implemented is another question. But I expect within the next year or two we will see some movement in that direction."
ASIC is due to report back on the success of the changes in 2018 and Chamberlain said by that point New Zealand would probably have made some changes, too.
| « Industry can't fix itself: MJW | Some advisers earning more than $750k per year » |
Special Offers
Comments from our readers
I also question the statement-
"it seemed likely that New Zealand would follow Australia's lead to regulate insurance commissions".
There is no evidence of this.
One specific aspect of our legislation that is distinctly superior to the Australian regime is the individual licensing of advisers.
Given the latest reports from Comminsure, ASIC will be gazing enviously (again) across the ditch, and wondering why we're considering adopting their entity licensing model.
The quality of the regulatory framework should not be sacrificed for budgetary considerations - either install an effective regime that can deliver on objectives, or don't bother at all.
The fundamental assumption in the MJW report, imported from ASIC's report prior to the release of the Trowbridge document, was that high initial commission creates conflict of interest.
That may or may not be the case, but neither ASIC nor MJW offered any substantive empirical evidence to support this assertion.
In the absence of such evidence, both reports are merely surmise, opinion, and subjective polemic.
There is a question over behaviour causing conflicted practice, but until validated evidence can be presented, regulating commissions in NZ is unlikely to gain traction.
Interested in seeing what the FMA investigation produces??
I suspect our FMA will wait for the ASIC report in 2018. Prior to which ASIC's claims avoidance investigation will have uncovered widespread evil in the CommInsure scandal and a royal Commission will have investigated and found, gasp, advisers aren't the root of all evil, and, shock horror, the focus of much regulation has been in the wrong direction. And when ASIC's 2018 report lists all the reasons, excuses and ponderings about why the things they wanted to fix arent't fixed and the things they hoped would change haven't changed. And their non-super based insurance sales are lower than ever, simultaneously creating a broader underinsurance problem and driving consumers into the hands of banks such as CBA's CommInsure; At that point, our FMA might say, as they have for some time now, 'we have watched and learnt from Australia. What they have done didn't work, we're not going to do that'. And all will be well.
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
why can't we do something for other country to follow? if i were to pay good money to consultants, i would expect them to tell me what is best for my situation NOT do what your neighbour is doing.
just my thoughts.