The Financial Services Council (FSC) is keeping the reduction of life commissions as a policy priority for whichever party takes office after July 2.

The demand is one of a list of priorities for the next government, with many of them based on the findings of the Financial System Inquiry.

CEO Sally Loane says the recommendations of the inquiry are a “significant focus of our policies”.

This includes setting upfront life commissions at 60% and 20% trails by July 1, 2018.

But the FSC says it supports level commissions if the measures don’t work.

“The reforms regulate conflicted remuneration on life insurance products and apply to personal and general advice,” the policy document said.

“These arrangements allow the continuation of upfront commissions at levels that provide support for the independent adviser market and also provide for an appropriate transition to remuneration practices that are better aligned with consumers’ interests.”

And the council supports a review in 2018 of the measures – which will need to be introduced into the next Parliament again as the current bill has lapsed – by the Australian Securities and Investments Commission.

“The FSC supports reviewing the application of the reforms and believes a commitment to move to level commissions and fee-for-service remuneration arrangements is necessary if the reform is failing to achieve its objective,” the document says.

The council is also calling for changes to regulation of the life insurance industry to tackle underinsurance.

It says Australia operates under “a highly segmented insurance framework” which is “stifling innovation in insurance products and the ability of insurers to meet consumers’ needs”.

It proposes a streamlined, consolidated prudential framework enabling providers to deliver multi-purpose products that would be better priced and more consumer-focused.

“This would improve the efficiency and effectiveness of insurance markets in Australia by minimising regulatory compliance costs,” the document said.

“Improving these market rigidities would assist in reducing the level of underinsurance.”

Another area the FSC wants a future government to tackle is the rules on life insurers offering rehabilitation services.

“Private personal disability income insurance is a means for individuals to protect themselves from economic losses that arise from both mental and physical disability,” the document says.

“However, only viewing this type of insurance as providing income protection ignores the wider benefits that this insurance could provide to consumers, society and public finances.”

The FSC says current legislation prevents life insurers from offering rehabilitation services in certain circumstances.

“Life insurers wish to make targeted rehabilitation payments for medical treatment or therapy that they determine to be relevant, appropriate and necessary to return the claimant to work.

“If these restrictions were removed, life insurers would be able to use more effective early claim intervention practices through offering rehabilitation benefits.”

The FSC is also calling for the removal of stamp duty on life policies, despite neither of the major parties showing interest in the issue.