Australia’s Financial System Inquiry final report has questioned whether commission-based arrangements are suitable for the sale of life insurance products or the activities of stockbrokers.

The report creates scope for efforts to address problems within the risk industry to be given time to work but says if there is no progress, the Australian Government should revisit a ban on commissions.

PAA president Bruce Cortesi said no one would argue there was concern about churn of insurance in Australia or New Zealand. “But changing the commission model will not stop that happening.”

He said the discussion should start with product providers. “They don’t have to accept business that is replacement business from another company.”

He suggested that if there were valid reasons for replacing a product with another, commission could stay as it is. But if there was no valid reason for switching, there might be no upfront commission paid but a reduced fee and renewal commissions.

Cortesi said commission was necessary because life insurance was a product that had to be sold rather than purchased. “I don’t see a line of people waiting outside my door to purchase life insurance. If that was the case, they could review it.”

There was also a need for a public awareness campaign to educate consumers about the value of advice, he said.

Michael Dowling, president of the IFA, said he was not surprised at the report, given the instances of poor performance that had been revealed in Australia.

New Zealand had a different structure that was more successful at regulating the industry, he said, with bodies such as the Code Committee ensuring the Financial Advisers Act was deployed appropriately.

The Australian report said industry attempts to self-regulate had not been successful. But Cortesi said New Zealand had a better chance of achieving that. “We can learn from Australia and here, professional associations generally have a good relationship with the FMA.”