The ban on upfront and trail commissions should apply to all life insurance sales and be expanded to cover general insurance, Industry Super Australia and the Australian Institute of Superannuation Trustees say in a joint submission to Treasury.

This would protect the financial system’s integrity, ensure customers are sold the right products and stop financial advisers acting against clients’ best interests, it says.

The Future of Financial Advice (FOFA) reforms only banned commissions for individual and group life insurance bought within super.

“The Government should remove the exemption in relation to the ban on commissions for all life insurance products and general insurance to ensure the availability, accessibility and affordability of high-quality financial advice,” the submission says.

“By failing to extend the ban of upfront commissions and trail commissions to all life insurance (whether inside or outside superannuation) and general insurance, the industry has accepted it will tolerate the provision of poor advice.

“This is akin to turning a blind eye to bad advice being provided.”

The industry remains “plagued” with cases of advisers and businesses that fail to act in their clients’ best interests, the submission says.

“So, while the FOFA reforms have had a significant impact in mitigating some of the risks in the industry, more needs to be done to ensure consumers are being connected to high-quality providers with products that deliver the appropriate benefits to them.

“The culture of sales-driven financial advice is not desirable or sustainable and will cost the economy, consumers and the industry much more in the medium to long term.”