AMP joins MLC in criticising ban on commissions

AMP will oppose the federal government's plan to ban commissions linked to life insurance sold in super funds, describing it as "ineffective policy".

By InvestSMART · 13 May 2011

By InvestSMART ·
13 May 2011

Comments

AMP will oppose the federal government's plan to ban commissions linked to life insurance sold in super funds, describing it as "ineffective policy".

AMP joins its rival MLC in criticising the ban, detailed last month as part of the government's broader shake-up of the superannuation industry.

AMP's chairman, Peter Mason, said yesterday that the ban would lead to low sales of life insurance products across the industry, potentially leading to a greater burden to taxpayers.

"We will also oppose proposals we believe to be ineffective policy, and the proposal to phase out commissions on insurance bought through superannuation is, we believe, one such policy," Mr Mason told AMP's annual meeting yesterday.

"Given the substantial underinsurance problem in Australia, we are concerned about the unintended consequences of this proposal, which we believe could worsen the problem."

Mr Mason said only 5 per cent of Australian families had adequate insurance, which was costing the taxpayer $130 million a year.

The big retail superannuation providers are widely seen as the hardest hit by the decision to ban commissions on life insurance products sold in super funds.

In announcing the ban last month, the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said the measures were in the best interest of consumers, given the high frequency of poor advice in the superannuation sector.

The financial advice reforms also include a ban on all super commissions as well as "soft dollar" payments to advisers.

Planners must also act in the best interest of their clients - a change that has broad industry support.

The government will introduce legislation later this year that would outlaw the payments from July 2012.

Mr Mason backed a broader ban on commissions for financial advice, saying it would boost consumer confidence in the industry.

The AMP chief executive, Craig Dunn, told shareholders yesterday that six weeks on from formally taking control of AXA Asia Pacific, good progress was being made in planning on the $14.6 billion merger.

AMP shareholders also approved a proposal for two AXA Asia Pacific directors, including the former chairman Rick Allert, to join AMP's board.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What is the proposed ban on commissions for life insurance sold in superannuation?

The federal government has proposed phasing out commissions linked to life insurance sold through superannuation funds as part of broader superannuation and financial advice reforms. The measures are intended to protect consumers after concerns about the high frequency of poor advice in the superannuation sector.

Why is AMP opposing the ban on commissions linked to life insurance in super funds?

AMP says the proposal to phase out commissions on insurance bought through superannuation is "ineffective policy." AMP's chairman, Peter Mason, warned it could lead to lower sales of life insurance across the industry, worsen Australia's existing underinsurance problem and ultimately increase costs for taxpayers.

Are other financial firms also critical of the commission ban?

Yes. AMP has joined rival MLC in criticising the ban on commissions for life insurance sold in superannuation, saying the change could have unintended consequences for insurance coverage in Australia.

How might the commission ban affect retail superannuation providers and everyday investors?

Big retail superannuation providers are widely expected to be among the hardest hit by the ban on commissions for life insurance sold in super. For everyday investors, the industry says there could be lower take-up of insurance in super, which may increase underinsurance risks for families.

What other financial advice reforms are included alongside the commission ban?

The reform package also proposes banning all super commissions and "soft dollar" payments to advisers. In addition, planners would be required to act in the best interests of their clients — a change that has broad industry support.

When would the ban on insurance commissions and related payments take effect?

The government said it will introduce legislation later in the year, with the outlawing of the payments scheduled to begin from July 2012.

What has AMP said about underinsurance in Australia and the cost to taxpayers?

AMP's chairman stated that only about 5% of Australian families have adequate insurance, and that underinsurance is costing taxpayers about $130 million a year — a concern AMP says could be worsened by the commission ban.

How is AMP progressing with its merger plans involving AXA Asia Pacific?

AMP's chief executive, Craig Dunn, told shareholders that six weeks after formally taking control of AXA Asia Pacific, good progress was being made in planning the $14.6 billion merger. Shareholders also approved two AXA Asia Pacific directors, including former chairman Rick Allert, to join AMP's board.