Labor has expressed concern about large institutions dominating the life insurance industry after the passing of reform legislation.

In a Senate Economics Legislation Committee report on the Life Insurance Framework bill, ALP senators also note claims the move will affect consumer choice, increase the cost of cover and lead to a decline in adviser numbers.

But the committee’s only recommendation is for the legislation to be passed.

“Concerns about the activities of large institutions are legitimate, and Labor acknowledges the risk that such institutions may come to dominate the industry,” the ALP senators say.

In a submission to the committee, comparator Rate Detective says it has already started scaling down the number of advisers on its staff, preferring instead to focus on other areas of its business.

In another submission, Paul Harrison of Concord Private Wealth argues the cost of doing business under the new regulations will be too high for some advisers.

“I’m sure the implications of the bill will see a reduction in adviser numbers and advice surrounding personal insurance, mainly due to reduced adviser commissions and excessive clawback periods,” he says.

“In a world with heavy compliance, advisers rely on their remuneration to meet their high licensing and compliance costs.

“The equation is simple: if revenue can’t meet expenses, then something has to give.”

The committee’s report notes concerns life insurance market share will shift to the institutions.

But it argues an Australian Securities and Investments Commission (ASIC) review of the legislation in 2018 will be “a valuable opportunity to assess the effect of the reforms on the industry and to balance that impact with the benefits to the consumer”.

Labor senators on the committee argue poor corporate behaviour among banks is a concern if they gain more market share.

“The Senate Economics References Committee is currently undertaking an inquiry into the life insurance advice industry as part of its broader scrutiny-of-financial-advice inquiry,” the Labor members say. “This inquiry is both timely and most welcome.”

In its summary of submissions, the committee says the bill will give consumers access to “unbiased and appropriate advice when considering purchasing life insurance”.

The report says to date advisers have been allowed to provide advice in their own interests, due to the commission structure.

“This bill will effectively address unnecessary churning and will ensure ASIC has greater regulatory oversight over the industry.

“The committee notes the concerns of submitters in relation to consumer choice and the future of the industry, but believes that the bill contains mechanisms to address these risks.”

The bill has passed the Senate, paving the way for the framework to become law on July 1.