Advisers providing life insurance services within superannuation cannot be paid if the Future of Financial Advice (FOFA) ban on commissions goes ahead.

Corporate Superannuation Specialist Alliance board member Gareth Hall told a Senate committee looking at FOFA that life insurance advisers face a bleak future.

“The banning of commissions in super and the inability to include an adviser’s service fee in MySuper accounts makes it almost impossible for us to be paid,” he said.

“The transition of existing accounts to MySuper over time will extinguish any existing fee agreements as well as cause numerous other problems for members of super funds.”

Mr Hall says the commission ban for group life insurance schemes cannot be justified because of allegations claims advisers are being paid huge upfront commissions.

“We believe that it is totally illogical to ban insurance commissions on group insurance inside superannuation,” he said.

“Contrary to the evidence provided to the parliamentary joint committee (on FOFA) by some groups, there is no upfront commission on group insurance of up to 130%.

“There are no upfront commissions on group insurance.”

Mr Hall told the committee part of the alliance members’ role is to negotiate group insurance policies for corporate super funds and usually they involve obtaining a discount from the insurer.

“We ensure the insurance is established properly, that the employees understand what their entitlements are and take advantage of them,” he said. “We make sure that they have the cover they require.”

He said group policies are reviewed periodically to make sure it is appropriate for the fund.

“This is not unadvised insurance, as has been suggested; it is advised insurance,” he said. “In many cases, our members will negotiate a discount that is much greater than the commissions that they receive.”

Mr Hall argued super fund members end up paying less money for an ongoing service.

“This goes against the belief that having an adviser involved with insurance will increase the cost of the insurance,” Mr Hall said.

“We are recommending a dial-up fee should be allowed for insurance service fees in both choice and MySuper funds.”