The Association of Financial Advisers (AFA) “doesn’t agree” with the recommendations of the Trowbridge report on life insurance, arguing the cost to advisers must be examined.

“It has been a challenging process for us,” CEO Brad Fox said.

“We don’t agree with Mr Trowbridge’s recommendations because they will need proper assessment of the outcomes for all stakeholders.”

The AFA is concerned the payment proposals could push up the cost of insurance.

“We need caution before hitting the go button [on the recommendations],” Mr Fox said.

But the Financial Services Council – joint sponsor of the review with the AFA – has welcomed the report.

“We... will now take the time to consider these independent findings in consultation with our members,” CEO Sally Loane said.

“Bringing the life and advice industries together to undergo an open and independent process in search of reform solutions – including changes in the culture of the industry as a whole – was a ground-breaking approach.

“The industry needs to absorb Mr Trowbridge’s recommendations and consider the complex, inter-related issues.”

Industry Super Australia says it is disappointed the report does not propose an outright ban on commissions.

“While the report may deal with the most egregious situations of churn, it fails to tackle the fundamental conflict caused by the existence of commissions, even if capped,” Deputy CEO Robbie Campo said.

“Conflicted remuneration structures are the primary cause of poor advice in Australia, featuring in every major advice scandal of the past decade. If allowed to remain, they will continue to undermine the quality of advice and insurance outcomes for clients.”

Other industry critics say the report is “a step in the right direction”.

The Consumer Action Law Centre, Financial Rights Legal Centre, consumer group Choice and Maurice Blackburn Lawyers have welcomed the report, but say the industry has still failed to show that removing commission-based sales is unfeasible.

A recommendation to stop advisers obtaining upfront payments for clients who have received advice within the past five years “is a particularly welcome response to the replacement policy or churn problem in life insurance”, the groups say in a joint statement.

Accountants group William Buck has welcomed the call for flat commissions but says the industry must also address the claims process.

“At present, clients can find themselves paying thousands of dollars to lawyers to process their claims, which is significantly adding to their insurance costs,” insurance specialist Sam Kitchen said.

“Additional consultation is needed in this area to determine a more effective fee structure that reduces the overall cost for clients.”

The Federal Government has given the report a cautious welcome, saying it makes a “significant and constructive contribution” to improving the quality of advice.

“The Government is currently consulting with industry and consumer groups on the Financial System Inquiry recommendations, and will consider the issues raised by the Trowbridge report in this context,” Assistant Treasurer Josh Frydenberg said.

“The Government’s consideration of its response to the Financial System Inquiry need not delay industry-led initiatives that may flow from the Trowbridge report.”