Australia's insurance sector should not be complacent if the federal government leaves risk commissions unchanged under its proposed reforms, a representative of the Association of British Insurers (ABI) has cautioned.
ABI acting director general Margaret Craig said she was struck by the similarities between Australia's regulatory proposals under the Future of Financial Advice (FOFA) reforms and those experienced by the United Kingdom insurance industry under its retail distribution review (RDR).
"I hope it is an omen for you that we used very many of the arguments that I know FSC (Financial Services Council) has been using," Craig told delegates at yesterday's 2011 FSC Life Insurance Conference in Sydney.
"We also talked about the fact the bias that was inherent in the retail investment market by payment of commission, it was not the same in the pure life market. So we were successful in keeping that [commissions ban] at bay.
"The optimist in me is quite pleased about that; the pessimist is that I'm not at all sure that will last. We may have only bought ourselves a stay of execution."
She said the UK regulator had already begun reviewing the mortgage market and might come back and look at the insurance or protection market.
"I don't think this is necessarily a deal that is going to hold forever," she said.
"So I hope it is a good omen for you that we managed. I wish you every success, but my word of caution to you would be not to rest on your laurels, assuming you are successful, but to work to make sure your market improves and demonstrate customer benefits so you can keep that at bay."
