The federal government is unlikely to introduce a blanket ban on commissions in insurance, but may instead choose to abolish commission payments on select parts of the sector, including group insurance and corporate superannuation, a number of industry industry chiefs have predicted.
Financial Services Council chief executive John Brogden said while the industry at one point faced the risk of insurance being treated as a political football, it was his belief the government would now view insurance as a stand-alone issue.
"If I had to make a call right now I would say that the commission relationship on directly advised life insurance will stay untouched by and large and commissions on group insurance will be banned. Although there will be other forms of remuneration of course," Brogden told the MLC Advice Solutions Risk Specialist Network Retreat in Kingscliff, New South Wales.
He said part of the reason the government could not ban commissions on life insurance was because there were "only two ways to go" with no middle ground.
"You either leave them alone or you get rid of them altogether; there is no middle ground. You can't be saying no commissions on superannuation, no commission on investments, but we are going to allow an up to 50 per cent commission on life insurance. That's just too inconsistent for them [the government]. So it's either all in or all out and we think they are heading towards the all in approach, but they [the government] are differentiating very strongly between group and individual," he said.
FPA chief executive Mark Rantall said the association was supportive of maintaining commissions, though he believed the government might target a ban at the corporate superannuation level.
"It has been identified there is legislative risk in commissions in insurance. What we as a professional industry do about that and the response to that is important [as is] how insurance companies lead out on this particular issue," Rantall said.
He said the difference in the way Treasury consulted the industry regarding its proposed ban as opposed to the way Treasury conducted its commissions ban on investments was another indication a blanket ban was potentially not on the government's agenda.
"The difference this time in terms of the consultation process that was different to the investment side where they were looking at banning commissions is that Treasury was coming to us with the view on investments and 'tell us why we should maintain commissions in investments?'" he said.
"This time Treasury has come to us with the view of 'tell us why commissions should be banned?' So it's putting it back on the Industry Super Fund Network and Choice and others who are looking to drive this agenda. So my sense is you can never be 100 per cent sure around these things, but commissions will probably be maintained at the retail level, but they will be banned at the corporate superannuation level."
Association of Financial Advisers chief executive Richard Klipin is also of the view the situation is not going to change.
"Our conversations with people in the know is that there has been advice to [Financial Services and Superannuation] Minister [Bill] Shorten there is really a clear sense of what is in the best interest of consumers and really banning commissions as a methodology of remuneration is not a good way to go. Hopefully that is what he's going to say and we're going to learn that fairly soon I hope," Klipin said.
The government is expected to hand down its final announcement on its proposed risk commission ban as part of its FOFA reforms next month.
