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Industry keen for phase two as advice overhaul progresses

Life insurers are ready for the federal government’s next phase of advice reforms, which include proposed changes to let the industry provide limited forms of advice.

Passage of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 in parliament last week is a “good first step” to addressing the advice affordability challenge, the Council of Australian Life Insurers says.

“We want to see legislation that allows life insurers to provide simple advice on their own products, when customers ask them to,” CEO Christine Cupitt said.

“We want to give Australians more choice at no cost to them. We shouldn’t be turning them away when they ring our call centres; giving simple answers to simple questions is basic customer service.”

At present, life and general insurers can only offer general advice.

Financial Services Minister Stephen Jones says the second tranche of reforms will further increase access and affordability of financial advice and will be developed over the second half of the year.

“This includes the government’s commitment to reform statements of advice, modernise the best-interests duty and remove the safe harbour steps, and increase the provision of advice by financial institutions.”

Under the government’s plan, a new class of advisers will be trained to provide “simple” advice. They will generally be employees of insurers and other financial services institutions, and they cannot charge customers fees or commission.

The new class of advisers is a recommendation from the Quality of Advice Review.

The government says additional guardrails will be introduced, such as mandated competency standards and compliance with a “modernised” best-interests duty.

Financial Advice Association Australia says it continues to engage with Mr Jones and Treasury on the second tranche of advice reforms. “These reforms have the potential to make good on the promises of the Quality of Advice Review and increase access to high-quality financial advice for more Australians,” association CEO Sarah Abood said.