The proposed Life Insurance Framework will not stand up to Australian Competition and Consumer Commission (ACCC) scrutiny, an adviser organisation claims.

The Life Insurance Customer Group (LICG) questions why the framework has not been submitted for ACCC review.

And it argues the Financial Services Council’s (FSC) push to have the framework passed by Parliament disguises the fact it is not in consumers’ interests.

“One of the behaviours the ACCC looks for is cartel behaviour – a group of industry players colluding to manipulate the market for their own benefit,” the LICG says.

“Cartel behaviour – price-fixing is an example – is against the law in Australia, unless a greater public interest can be proven. If everyone agrees, and the claims for benefits can be substantiated, the ACCC can approve what would otherwise be deemed price-fixing.”

The LICG says if all insurers agree to reduce their commissions to the same rate, paid at the same time on the same day, with a common clawback arrangement, it is a cartel.

“The FSC opted to hastily force the framework ‘reforms’ through with messy legislation because, perhaps, it did not believe it could satisfy ACCC scrutiny.

“The FSC has no data on which to justify its position, no rationale behind reducing remuneration to its recommended level, and no one has been able to specify one single benefit to consumers.”

The LICG says the lack of independent data on churn makes the FSC’s case for the framework hard to justify.

“There is no evidence of ‘churn’. No one has even defined ‘churn’. If the FSC believes its own rhetoric about ‘churn’ and ‘significant consumer benefits’, and has sufficient evidence to substantiate its claims, why not go to the ACCC?”

insuranceNEWS.com.au contacted the FSC to comment on the LICG claims, but has not received a reply.

“Had industry gone to the ACCC with a proposition that could provide a better outcome for consumers, despite the negative impact on some stakeholders, reforms could have been implemented a year ago,” the LICG says. “Consumers deserve to be able to trust that our financial services sector representatives are acting for them, and not just for the shareholders of the huge organisations that make up the FSC.”

The LICG wants the FSC to sit down with all industry stakeholders to resolve divisions between insurers and advisers.