Advisers in Australia have raised objections to the impending cessation of insurance commission payments applying to a set of policies written through BT Financial Group.
The key issue, which has caused significant confusion among some advisers across the Ditch, relates to what they believe were individually-underwritten personal life insurance policies. These policies were BT Life Protection Plans that were written through BT SuperWrap prior to 22 June 2012.
What appears to have occurred – without advisers having been pro-actively notified – is that these policies, while written individually, were implemented under a group insurance basis; not as individual contracts.
Because the policies were implemented as group insurance, they have become subject to the Ending Grandfathered Conflicted Remuneration Act 2019, which was passed following recommendations contained in the final report of the Banking Royal Commission.
Under this legislation, payment of grandfathered group superannuation life insurance commissions (not originally included in the 2012 Future of Financial Advice legislation reforms) will cease from 1 January 2021, with the amount of commission rebated in future to the client’s superannuation account by way of lower premiums.
Advisers who have spoken to Riskinfo aren’t disputing or objecting to the validity of the 2019 legislation, but rather to the fact they believe they had written these contracts as individual policies and were not notified the policies were implemented as group insurance.
…believe they had written these contracts as individual policies
AdvisersBT’s Head of Adviser Distribution, Life Insurance, Steve Craig, has acknowledged in a statement that BT Life Protection Plans cover offered in BT SuperWrap with a risk commencement Date before 22 June 2012 were individually underwritten but offered under a group contract.
Craig adds that cover written under these products was originally provided by another insurer under a group life policy structure. However, when Westpac Life Insurance Services was asked to take over as insurer for these products in September 2007, the Trustee requested WLIS to take over as insurer under the existing arrangements.
Craig emphasises that the Future of Financial Advice legislation relating to commissions had not been foreseen at the time Westpac Life Insurance Services became the insurer and that the impact of the legislation on the group insurance structure applying to these contracts was not considered when the structure was adopted.
From the adviser perspective there have been two main issues, namely that:
- They appear not to have been advised the individually-written business was implemented under a group insurance basis
- The relative lack of notice they say they have received from BT has given them little time to address and manage any issues in relation to their servicing relationship with their impacted clients, where their renewal commissions have, until now, funded the annual cost of servicing these clients
“We acknowledge advisers are extremely busy and facing a great deal of change in running their practices, particularly at this time,” notes Craig, “…and we would have preferred to be in a position to provide more notice around the details of impacted policies ahead of this change.”
Craig adds that his team at BT will continue to be available to assist advisers, on request, with additional information and support to help manage this change.