Ensuring the life insurance industry operates effectively for advisers and clients alike requires more than banning upfront commissions, the Financial Planning Association (FPA) says.

In a response to the Financial System Inquiry report, it rejects a level commissions model.

The inquiry, led by former banker David Murray, recommends changing the law to stipulate that an upfront life insurance commission is not greater than ongoing commissions. The report says this would reduce incentives for churning and improve quality of advice.

The FPA says it recognises that remuneration structures around life insurance can create conflicts of interest between advisers and clients, but this is not the only issue in the industry.

“Sustainability is one of the toughest challenges for the entire insurance market, and one of the key causes of rising premiums.”

The FPA says there is no evidence of how the inquiry proposal will affect premiums, nor analysis of the impact on the tax deductibility of some income protection premiums.

It says higher professional standards will drive change in the life sector, and remuneration for insurance work should be commensurate to work undertaken.