The Labor Party remains concerned about clawback periods despite the House of Representatives passing the Life Insurance Framework legislation.

Opposition Whip Graham Perrett told the House the reform fixes some problems in the life insurance advice industry, but falls short on remuneration.

“Labor still has significant concerns that the clawback period in this bill is only two years – one year less than the original industry agreement.

“This means financial advisers will get to keep their upfront commission even if they move a client on to a new product after just two years.”

Mr Perrett says consumer groups consider commission-driven churning one of the life industry’s major problems.

“Australians have traditionally had confidence and trust in the fairness of our financial services industry, including the life insurance industry,” he said.

“We need to see that reinstated.”

Mr Perrett says only a royal commission on banks and the insurance industry will achieve this.

Liberal MP Craig Kelly told the House there is nothing wrong with moving a life insurance policy after two years if better cover is found.

“The only problem that comes about is when those large… insurance companies have decided they would pay these large upfront commissions and then they have to continue to pay them time after time. That becomes an incentive perhaps for the financial advisers to sell the policies and to churn the policies over.”

Mr Kelly says better disclosure is more important.

“If someone signs up to an insurance policy, let them know what percentage commission the salesperson is getting,” he said.

“Let them know what percentage of claims are being paid by that life insurance company.”

Mr Kelly says the idea government knows best is often wrong, especially when setting prices.

Labor MP Matt Thistlethwaite says while the bill “modestly improves protection for consumers” buying life cover, more work is needed. He backs the call for a royal commission.

“This bill does not address broader issues in the life insurance industry, such as issues with claims handling and outdated medical definitions,” he said.

The legislation will be debated in the Senate when Parliament resumes in February.