Senator Jess Walsh, Committee Chair: Ms Cupitt. Did you have an opening statement that you wish to give?
Christine Cupitt, Council of Australian Life Insurers (CALI) CEO: I do, Senator.
Senator Jess Walsh, Committee Chair: Go ahead.
Christine Cupitt, CALI CEO: Thank you Chair. I’d like to start by focusing on the critical role that life insurers play in Australia every day. They give people peace of mind as they face life’s biggest decisions and challenges, whether that’s having a baby, buying a house, starting a business or preparing for retirement. We take this role very seriously, and we want Australians to have more choice when it comes to getting advice about their life insurance needs. We have an advice accessibility crisis in Australia. The Delivering Better Financial Outcomes and Other Measures Bill will help expand Australians’ access to advice and back-in the vital work of financial advisers across the country. As cost-of-living pressures rise, many people are now less certain about their financial situation. They know they need to manage their household balance sheet, and getting professional advice on their life insurance is an important part of that. But this can cost more than $3000. Independent research commissioned by CALI found that seven in 10 Australians are concerned about the impact of cost of living when it comes to taking out or continuing to pay for life insurance. Access to affordable advice helps empower people to make informed choices so they can live in a healthy, confident and secure way over their lifetime. In the past three months alone, more than a quarter of Australians have considered getting financial advice on life insurance but haven’t acted on it. Just eight per cent have received it in the same time frame. People need someone to talk to. Making these decisions is hard, and they should not have to do it alone. Financial advisers do an incredible job helping Australians with personalised and holistic financial plans. But there aren’t enough of them with just 1000 nationally who regularly help people navigate life insurance products. Our research shows that a third of people who received life insurance advice in the past three months got it from their family and friends. It proves that the cost of advice remains too high, and more needs to be done. CALI is working with the Federal Government on the next tranche of these financial advice reforms. We want to see legislation introduced that allows life insurers to provide simple advice on their own products, and only when customers ask them to. Of course, this should only happen with appropriate limitations and strong consumer protections. We should not be turning people away when they ring our call centres. After all, giving simple answers to simple questions is basic customer service. For people whose needs are more complicated, life insurers will continue to put them in contact with financial planners who can give them broader advice that compares products across the market. But for more simple matters that relate to one life insurer’s products alone, and where people can’t afford or don’t want a holistic plan, we want to give Australians extra choice at no cost to them. This will be very different to the role of financial advisers. We only want to complement the important and valuable work they do, not get in their way.
Senator Jess Walsh, Committee Chair: Thank you very much. Mr Klipin.
Richard Klipin, National Insurance Brokers Association (NIBA) CEO: Thank you Senator and good morning everyone. Thanks for the opportunity to present before the senate on this very important topic. Just in my opening statement, I wanted to acknowledge joining me today is my colleague Gary Okely, who’s the president of NIBA and also head of public sector at JLT Risk Solutions, as well as Allyssa Hextell who is NIBA’s head of policy and advocacy. Just a little bit about NIBA, the National Insurance Brokers Association is the peak body for representing the general insurance sector, the brokers. NIBA has over 450 member firms and 15,000 brokers that sit within those firms. Our members encompass a diverse range of entities, large multinational brokers, Australian broker networks, as well as small and medium sized businesses right across the breadth and depth of Australia. The role of the broker in serving these clients and their broader communities has never been more important as Australians are facing increased risks due to increasing frequency and severity of natural disasters. In light of this, balancing the need for accessible and affordable advice has never been more important. NIBA’s work is guided by our core pillars, representation and advocacy, community and professionalism, and our mission is to enhance the professional standing of insurance brokers through advocacy, education and ethical standards. Insurance brokers are the essential intermediaries between customers and insurers by providing expert advice, risk assessment and tailored solutions to meet their clients. Brokers also play a really key part during claim time, acting as a client’s advocate and helping them navigate the claims process. NIBA supports the objectives of these reforms to ensure that financial advice including general insurance advice remains accessible and affordable for all Australians. NIBA advocates for a regulatory framework that facilitates the delivery of high-quality advice. By doing so, we can enhance the financial outcomes of all Australians and ensure that Australian communities, their families and businesses remain robust and resilient. Thank you for the opportunity to address the committee. We look forward to your questions and discussing how we can work together to achieve our shared goals. Thank you very much.
Senator Jess Walsh, Committee Chair: Thank you very much for that opening statement. I’ll just start with a few questions and then hand over to the deputy chair. I’ll just start with CALI. Just for the purposes of this inquiry, your submission of course was made prior to the government amendments to the bill. So, I just want to clarify that from your perspective, the Government amendments to the Bill have addressed the unintended consequence that was there in relation to insurance commissions, which, you know, didn’t align with the policy intent. Are you satisfied with the amendment and with the outcome of the Bill for insurance commissions?
Christine Cupitt, CALI CEO: Thank you Senator. Yes. We’ve reviewed the amendments closely and we are comfortable that they reflect the Government’s stated policy intent of preserving the conflicted remuneration exemptions and only introducing the consent requirement for personal advice.
Senator Jess Walsh, Committee Chair: Great. Thank you. And I’ll just stay with you for a moment, Ms Cupitt. You talked a bit about the important role of financial advice and life insurers in that. And the Bill is part of broader changes that the Government is progressing to respond to the Levy Quality of Advice Review, and the first tranche as we know, focuses on reducing red tape for advisors and streamlining some of the processes around fee renewal and consent requirements, some flexibility in how financial service guide requirements can be met online, and so on, simplifying the rules around conflicted remuneration and clarifying how financial advice is paid from a super balance when it’s related to retirement outcomes. At the moment for your sector, why is it hard for insurers to provide helpful advice at the moment, and how do you see that being assisted as these reforms progress?
Christine Cupitt, CALI CEO: Thank you, Senator. We agree that this Bill is a critical first step to expanding Australians access to financial advice and reducing red tape for financial advisors. The challenge that our customers face every day is that they do ring our call centres or look online at our websites and they aren’t able to get simple, personalised answers to simple questions that they really believe are customer service. The challenge that we face is that in asking and understanding a little bit about our customer circumstances, we move into the regulated personal advice space and that comes with the kinds of requirements that apply to financial advisors. So, we’re looking at, in a sensible.and safe way, introducing a framework that would allow life insurers to provide those simple answers to customers about their own products when the customers ask for it. Of course, with all the appropriate safeguards and controls to ensure that the customers are at the centre of the service we provide them.
Senator Jess Walsh, Committee Chair: Yeah. Thank you. And what does it mean for, for your sector that these changes to consent form requirements are coming?
Christine Cupitt, CALI CEO: I’m sorry Senator, could you repeat that question?
Senator Jess Walsh, Committee Chair: Yes. What does it mean for your sector that these changes to consent form requirements are coming?
Christine Cupitt, CALI CEO: So, we want Australians to have access to the information that they need to make informed choices. We understand that the intention behind putting the consent in place is to make sure that customers have access to the information that they need to understand how their adviser is paid and how that might inform the advice. We absolutely support Australians having access to that information.
Senator Jess Walsh, Committee Chair: Okay, great. And do you support the passage of the Bill as it is, given the Government amendments to the Bill that we’ve talked about?
Christine Cupitt, CALI CEO: We do. This is a critical first step in supporting the Government and the industry’s objectives of getting more advice to more Australians, and we think that we should support that first step and look forward to working with the Government on the second round of reforms.
Senator Jess Walsh, Committee Chair: Okay, thank you. And just for NIBA as well, you know, there’s a range of recommendations from the Levy Review that are being dealt with in this first tranche and the second tranche, as you know, is underway. Why do you see it as important that the government implements these recommendations from the Quality of Advice Review in the first tranche to reduce red tape and open up access to financial advice?
Richard Klipin, NIBA CEO: Thank you, Senator. I will bring my colleagues in, in just a moment. I think the answer is that advice helps Australians make good decisions about managing their risks, insuring their risks and choosing the right products and services for them, and anything that makes that system simpler and easier, whilst protecting consumers at the same time, is important. I might bring Allyssa and Gary into the conversation at this point, if that’s okay, to see if there’s anything else they’d like to add.
Gary Oakley, NIBA President: Thank you, Richard and thank you, Senator. Yes, we’re supportive of the proposed reforms as they are proposed, certainly with the corrections that are being made now in the last tranche reviews. It’s important for, as Richard just mentioned, for consumers to get access to quality advice. Brokers represent 50 per cent of the premium volumes of insurance in Australia. We know that clients come to us, come to us for advice. And where they do, we often find issues like underinsurance… we know that brokers can access a variety of different insurance markets and options as well that support better consumer outcomes from the advice they receive. So, access to quality and affordable advice we see is a really important part of our role as representatives of consumers in Australia.
Senator Jess Walsh, Committee Chair: Great, thank you. I’ll just see if the deputy chair has any questions. Senator Bragg?
Senator Andrew Bragg, Committee Deputy Chair: Thanks so much. How bad were the drafting errors in this bill?
National Insurance Brokers Association Richard Klipin: Senator, thanks for the question. Look, we’re comfortable that the drafting errors were addressed, they were addressed swiftly, that the unintended consequences have been addressed and managed. And we’re pretty focused now on the future. So, comfortable to learn what we’ve learned but very much focussed on the future.
Senator Andrew Bragg, Committee Deputy Chair: Okay. Do you have a view about the… this is to anyone by the way… has the Government been too slow on implementing the recommendations from the Quality of Advice Review?
Richard Klipin, NIBA CEO: Senator, it’s obviously been a very long and complex process as we’ve gone through regulatory change, you know, really starting back with FSR in the early 2000s and then the global financial crisis. So, you know, good things take time, and it’s been a long journey for all in the sector. For right now, it’s been appropriate. There’s a lot to, a lot to make sure that we are focussed on to get it right. And sometimes getting it right takes time. So, within the NIBA community, we’re comfortable with the direction of travel but certainly look forward to know that this is only the first tranche and there’s plenty more to come.
Senator Andrew Bragg, Committee Deputy Chair: So, what else needs to happen here in terms of the first tranche, or more broadly? I mean, what are people hoping is going to be in place before we go to the election? It’s a question to anyone.
Christine Cupitt, CALI CEO: I might jump in on that one, Senators. So, from our perspective, and I think everyone’s shared aim is to ensure that more Australians have access to affordable advice and more choice about where they can obtain that advice. So, for life insurance customers who ring in every day with simple enquiries, we would like to see a framework in place that allows them to get answers and basic customer service to simple questions about their cover. And to help them manage that cover, particularly in the context of a cost of living crisis.
Senator Andrew Bragg, Committee Deputy Chair: Yeah. So, what are people hoping is going to be in law by the time of the election?
Christine Cupitt, CALI CEO: Well, we think that these are very important reforms that, as Mr Klipin has said, do take time to get right. But we would like to see the Government moving forward with tranche two of these reforms, and moving forward with a framework that would enable life insurers to provide simple advice about their own products to the customers who ask for it.
Senator Andrew Bragg, Committee Deputy Chair: Okay, so there’s no other law reforms you want this parliament? This is it? This is all you… all the industry is seeking, is this bill? That’s it, done?
Christine Cupitt, CALI CEO: Well, from our perspective, this is one of the most critical issues that Australians face in making sure that they are financially resilient and that the community is financially resilient. So, we are working closely with the Government stakeholders in the parliament to ensure that these reforms can progress.
Senator Andrew Bragg, Committee Deputy Chair: Are your comments only in relation to insurance commissions in relation to drafting errors? Do you have any views about part one, section one, referring to section 99 FA?
Christine Cupitt, CALI CEO: Our comments and our submission relate to the consent requirement in relation to life insurance commissions. That is our laser focus. Our laser focus is ensuring that people have more choice and more access in obtaining advice about their life insurance needs. So, this was the primary concern that we had with the Bill. And as I remarked earlier, we feel that those drafting errors have been corrected and we’re comfortable with the Bill.
Senator Andrew Bragg, Committee Deputy Chair: Do you think there are any other errors in the Bill elsewhere?
Christine Cupitt, CALI CEO: So, for CALI members and for CALI, our laser focus has been on those consent requirements and having that technical drafting error addressed.
Senator Andrew Bragg, Committee Deputy Chair: So, you don’t think there’s any other issues in the Bill elsewhere? No one’s raised any other issues you’re aware of?
Christine Cupitt, CALI CEO: So, our submission goes to that consent issue, and that is the issue that CALI has come today to talk about.
Senator Andrew Bragg, Committee Deputy Chair: I understand you’re trying to give me a very narrow answer there, but do you know there are other issues in the Bill or not?
Christine Cupitt, CALI CEO: I think to the extent that there are other issues, that it’s a matter for others to comment on those.
Senator Andrew Bragg, Committee Deputy Chair: And who do you think would be able to give us advice on that?
Christine Cupitt, CALI CEO: Well, I understand that there’s a program of witnesses today, Senator Bragg.
Senator Andrew Bragg, Committee Deputy Chair: Okay, so you think they are probably comments for others to make?
Christine Cupitt, CALI CEO: Yeah, our focus is very much in relation to advice on life insurance and resolving the technical drafting issue in relation to introducing the consent requirement.
Senator Andrew Bragg, Committee Deputy Chair: Yeah. Okay. So, basically, if the election was held tomorrow, you’d be comfortable that the Government’s dealt with all the advice issues you think are important to your membership in this Bill?
Christine Cupitt, CALI CEO: Well I think at the end of the day, Senator, what we want is to make sure that Australians have more choice and accessible financial advice, and that is why we want to continue to work with the Government and other political stakeholders on tranche two of these reforms, which would introduce a framework for life insurers to provide simple advice about their own products to their own customers.
Senator Andrew Bragg, Committee Deputy Chair: Okay, so your view is that there’s more to do, more work to do here?
Christine Cupitt, CALI CEO: Yes, this is a terrific first start and an important first start, this Bill. But there is more to do, and we very much welcome working with the Government on tranche two of these reforms.
Senator Andrew Bragg, Committee Deputy Chair: Okay. So… and do you think that would pass this parliament or what’s your expectation?
Christine Cupitt, CALI CEO: Well, ultimately, that’s a matter for the Government but we would certainly like to see progress in relation to tranche two and us moving towards a framework for life insurers to provide that critical advice and service to their customers.
Senator Andrew Bragg, Committee Deputy Chair: Yeah. Okay. So, basically your view is this is helpful for your members? It tidies up all the drafting messes, and then there is more, more work to do in this term? Is that right? Is that a reasonable summary of your position?
Christine Cupitt, CALI CEO: Yes. We have an advice accessibility crisis, and we welcome the work that the Government and other political stakeholders have already done to begin to address that. And we want to continue to work with Government on tranche two of these reforms, these critical reforms.
Senator Andrew Bragg, Committee Deputy Chair: What would be in tranche two?
Christine Cupitt, CALI CEO: So, what we would like to see in tranche two is a framework that would allow life insurers to provide simple advice to their own customers about their own products when the customer asks for it.
Senator Andrew Bragg, Committee Deputy Chair: Life insurers could provide any type of advice to the clients?
Christine Cupitt, CALI CEO: Well, life insurers to provide simple answers to their customers, to the questions that our customers ring up every day asking us. We’re very much driven by what our customers’ needs are and what they call us asking for. What they’re telling us they want is the ability to get simple answers to simple questions at no additional cost to them.
Senator Andrew Bragg, Committee Deputy Chair: Okay, thank you very much.
Senator Jess Walsh, Committee Chair: Thank you, Senator Bragg. That concludes the questions that we have for you. So, thank you all very much for appearing.