Comment by John Wilkinson

It started as a battle between life insurance companies and advisers, but has escalated to civil war in the Association of Financial Advisers (AFA).

The fight over life insurance commissions has led to the association rejecting calls for an extraordinary general meeting to discuss its support for the proposed Life Insurance Framework.

More than 200 members requested a meeting to change the AFA’s constitution, to stop the member-elected board from deciding policy positions in relation to life insurance for three years.

Under AFA by-laws an EGM can be requested by a group of members with at least 5% of votes at the meeting, or 100 members entitled to vote at such an event.

The association now says preliminary checks of submitted forms show a substantial number of duplicates. It says some are from non-members and some are incomplete.

Some AFA members believe their association sold them out when it joined the Financial Services Council’s review of the industry, led by John Trowbridge.

insuranceNEWS.com.au has been told the Financial Planning Association (FPA) warned the AFA not to become involved, because the outcome would not be in advisers’ interests.

The AFA joined the review and paid for some of its costs.

CEO Brad Fox has defended the decision.

“The AFA under President Michael Nowak chose to participate in the Life Insurance and Advice Working Group (LIAWG) because the board believed the Future of Financial Advice parliamentary joint committee process had been unsatisfactory,” he told insuranceNEWS.com.au.

“[The board] thought this gave the AFA a better opportunity to put advisers’ views and moderate the interests of life insurers.”

Mr Fox says there were numerous opportunities for members to participate in the LIAWG through submissions, and the association sought feedback on Life Insurance Framework proposals.

Some members have accused the AFA of pandering to life insurers, which support the association by paying for exhibition space at roadshows and the annual conference.

Mr Fox denies this, saying the association would take firm action if a company tried to influence its decisions.

“The AFA board made a very clear… decision that any partner that attempted to exert influence on the AFA would have its partnership position rescinded,” he said.

“There has been no direct influence put on the AFA by any partner, and the board was clear it would end any relationship where that became an issue.”

While a number of members are pushing for change at the association, it has found one ally in Sentry Group CEO Murray Hills.

In an open letter to the financial services industry, Mr Hills has criticised the Life Insurance Consumer Group (LICG) for attacking the AFA.

“Sentry took a very dim view when the LICG and one of its founders publicly turned on the AFA because this has now seriously detracted from the merits of their case, and adversely on the integrity of both organisations and the financial services profession as a whole,” Mr Hills wrote.

“No reasonable person can support an attack solely on the AFA and wonder why the initiator does not apply the same logic and tactic against the FPA – unfortunately, it can only be interpreted as a personality clash.”

Mr Hill notes disunity among financial advisers will be used by lawmakers and regulators to push for the proposed legislation. He says it will also damage consumer confidence.

Certainty, the conflict distracts from the true battle – the fact a number of life insurers want to improve their bottom lines by removing $3 billion of commissions paid each year.

Will this infighting benefit consumers? The obvious answer is no: they already perceive life insurance to be something you pay for with no benefit unless you claim.

Perhaps it would be better for insurers and advisers to spend their time explaining to politicians, regulators and consumers that the industry pays more than 95% of claims.

That must help grow the industry. The current battles seem destined only to shrink the market.