The level of industry representation on the FASEA Board has been increased following Senator Jane Hume announcing that Will Hamilton would join the Board as a part-time Director earlier this week. In other regulatory news, the Australian Prudential Regulation Authority (APRA) has launched an intervention into the life insurance market in response to ongoing heavy losses in the sector in regard to individual disability income insurance (DII). The action includes ceasing the sale of Agreed Value policies.
New FASEA Board Member
A statement from the office of Senator Hume said Mr Hamilton will bring to the Board experience in carrying on a financial services business. He is the Managing Director of Hamilton Wealth and was previously General Manager Wealth Services at NAB, Head of Private Wealth Management at Goldman Sachs JBWere, and Managing Director and Chief Executive Officer of Deutsche Securities Asia in Hong Kong. Mr Hamilton is also currently the Commonwealth representative on the Professional Standards Council, an appointment made by the former Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer.
The announcement means that board is now at its full number, after the previous resignation of CountPlus chief executive Matthew Rowe, who stepped down from the FASEA board on 14 August 2019. Hamilton’s appointment increases the industry representation of FASEA’s board to three, joining former AFA president, Deborah Kent and former FPA and Financial Ombudsman director Louise Lakomy. Other Board members include the Chair, Catherine Walter, Mark Brimble, Dr Simon Longstaff, Carolyn Bond, Elissa Freeman, and Catriona Lowe.
Hume said this appointment will continue the high level of skills and experience available to FASEA, to help ensure that the key sectors of our economy are effectively regulated.
APRA Announce Insurance Changes
APRA has recently announced a series of measures, including capital charges, that will require life insurers and friendly societies to address flaws in product design and pricing that are contributing to unsustainable practices. APRA said it wrote to the industry in May requesting urgent action to address problems and Life companies had reported losses of a billion dollars since then. It said Life companies have collectively lost around $3.4 billion over the past five years through the sale of DII to individuals.
APRA said that life companies have been keeping premiums at unsustainably low levels and designing policies with excessively generous features and terms that, in some cases, provide a financial disincentive for policyholders to return to work. With already at least one major reinsurer indicating it was no longer prepared to reinsure individual DII, APRA Executive Board Member Geoff Summerhayes said there is now a genuine risk insurers may start withdrawing from the market.
APRA has decided to impose an upfront capital requirement on all individual DII providers, effective from 31 March 2020. The capital requirement will remain in place until individual insurers can demonstrate they have taken adequate and timely steps to address APRA’s sustainability concerns. In instances where individual insurers continue to fail to meet APRA’s expectations, APRA may also issue directions or make changes to licence conditions.
APRA also expects life companies to better manage riskier product features, including by:
- ensuring DII benefits do not exceed the policyholder’s income at the time of claim, and ceasing the sale of Agreed Value policies;
- avoiding offering DII policies with fixed terms and conditions of more than five years; and
- ensuring effective controls are in place to manage the risks associated with longer benefit periods.
APRA said it will engage with industry stakeholders on the implementation of these measures and to ascertain other possible measures to assist returning IDII to sustainability. While acknowledging changes needed to be made to support sustainability for income protection insurance, many advisers were concerned about how the changes would effects their clients, including the adviser’s mandated requirement to respect their clients’ best interests. Some commentators have countered the argument of poor product design by claiming that over regulation is the cause of the problem, saying this has led to lower new business inflows to cover the outflow of claims.
Article by:
Comments8
"@PCody - why would "He understands the coal face" not be allowed "these days"? At the coalface means "doing the hardest part of a job instead of just managing or organising it" - like coal miners...who work at the coal face.... I reckon most people worried about "PC issues" don't know what they're talking about and are making 2 jumps. One jump onto the bandwagon of their favourite right whinger (winger) - and the second jump is at shadows (whatever shadow triggers their fear). There is enough real stuff to worry about both in this industry (reg change) and in the wider world (climate change) than culture warrior PC guff like you mention. Why bother?"
PC Warrior 11:27 on 12 Dec 19
"Someone should have a look at Will Hamilton’s CV. He started his own company by taking a few clients from Westpac, where he worked as head of private bank Victoria He has not spent more than a couple of years in any role before being moved on. Having worked with him. I can confirm he is completing out of touch and does not have much idea of what advisers do and the value they add let alone any respect for them. "
Robert 11:05 on 12 Dec 19
"I can advise Will Hamilton does advise clients in response to comments here fearing he may not. He understands the coal face ( if this expression is allowable these days)"
PCody 22:06 on 11 Dec 19
"Well said Jeremy Wright...you summed it perfectly. I just cannot believe how the debacle that this broken wretched industry has become, has been allowed to happen. It all started when ASIC released its tainted Report #413. John Trowbridge was clearly nobbled for his opinion on that. Then came O'Dwyer with her (aptly named) 'bull-headed' approach to reducing advisers incomes and extending our responsibility period from 1 year to 2 years. I bet she didn't even know where she'd be 2 years after she signed off on LIF so how exactly are advisers meant to know what our clients will be doing in 2 years? This ludicrous legislation was then disgustingly capped off by her signing off on a pay rise to her and other MP's shortly after. Then came the 'Best Interests Duty' and FASEA circus - with Board members at FASEA so conflicted; it is literally impossible for me to understand how any 'honest' and right minded Federal MP could support anything they've put to Parliament. I have no hesitation in saying BID was designed solely to make it difficult for advisers to do what we do so we leave the industry. Yes Jeremy, its absolutely outrageous what's happening to this industry and what it'll become in just a few years but I strongly suspect the filthy fat cats sitting in their bell towers at the Big 4 and second tier banks who've conspired to make this all happen will be salivating at how its been allowed and what's coming when very few advisers are left to serve Australian consumers in the near future. It's just disgraceful what the pollies have allowed and greed to. This appointment is yet another example of the lunacy."
Beyond Comprehension 17:54 on 11 Dec 19
"In 5 years, when a plethora of reports, commissioned at a cost of millions of dollars of Tax Payers money is released, explaining the demise of the Retail Life Insurance sector and Australians inability to attain quality Life and Disability Insurance contracts, or advice, what will be revealed was a total collapse of common sense, mixed with insane, unworkable Government interference and the very regulations that were supposed to improve and make it easier for all Australians to attain quality advice and Insurance products, in actual fact, did the opposite. Best Interest Duty, will have been replaced with worst of the worst policy definitions that only will benefit Life Insurance Companies, at the expense of ALL Australians. Fawlty Towers will be the bench mark that will be used to show how the Government, the Big end of town, vested interest groups and all the left wing nut jobs, were able to take a great Life Insurance Industry, that paid multi-Billions of dollars to affected Australians in need every year and turned it into a Mental Asylum run by the lunatics. The problems were small, the solutions, a disaster and the first major casualty, was the truth."
Jeremy Wright 15:19 on 11 Dec 19
"This latest appointment is just a joke and an insult to everyone's intelligence. Steve is spot on in saying it would be a long time since Will has been at the coal face advising everyday clients. The kicker is that Will was appointed to his role with the PSC by none other than Kelly O'Dwyer, who started FASEA because of "persistently bad advice by financial advisers" It just looks like jobs for the boys. Until we get some honest, sensible, caring politicians (is there such an animal) on our side to rein in this bureaucratic road train we will just have to roll with the punches - again. No use being bothered about the APRA intervention. That will work itself out. there is nothing advisers can do about a line of business losing money."
Deputy 15:15 on 11 Dec 19
"I agree with Carlos's comment. When I read the headline that an extra industry rep had been appointed, I was optimistic that an actual financial planners' point of view might be helping to guide the board. Sadly, it appears that, if Will ever did advise ordinary clients, it was a long, long time ago."
Steve 14:13 on 11 Dec 19
"From his cv it doesn't sound like Will has been advising clients lately. How good is the board?"
Carlos 13:54 on 11 Dec 19