Insurance Industry Braces For Guidelines
Sydney Morning Herald
Tuesday May 1, 1990
Guidelines requiring life insurance firms to disclose to insurance and superannuation bond investors all direct and indirect commissions payable to agents would turn the industry on its head, a senior life insurance executive forecast yesterday.
Mr Wayne Kedward, Mercantile Mutual Life's manager investment products, told a life insurance conference in Sydney that the detailed disclosure requirements, which came into force last month, would require agents to tell buyers of singlepremium products, such as bonds and deferred annuities, all commission payments the agents would receive, plus any override or other bonuses and incentives.
Other indirect benefits received, such as subsidised loans, including agency development and home or car loans, would have to be disclosed.
The guidelines, which Mr Kedward expected to be extended later to regular-premium products such as savings plans and repeat-premium superannuation plans, came after pressure from consumer groups and the media over some agents' aggressive selling practices.
Some agency groups and individual agents sell long-term contribution plans- such as 30-year plans - but either do not disclose this to the investor or in some other way give investors the impression that the policy spans a much shorter term, such as 10 years. This practice yields the agent very high commission payments in the first year - often 100 per cent of the first year's premiums and sometimes higher.
Mr Kedward said it was unfortunate some of these aggressive sales groups were still marketing in this fashion, although they changed wholesalers every year or 18 months.
"What I do see happening is that with the advent of greater disclosure, there will be a greater move towards fee for service or at least the choice of fee for service or commission," he told the conference.
"Secondly, there will be greater emphasis placed on the payment of renewal or trailing commission as more groups opt for a regular income."
© 1990 Sydney Morning Herald