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Exit of the life insurers leaves the FSC with a revenue hole

By Mike Taylor23 June 2022


Make no mistake, the exit of the major life insurer and the reinsurers has left a gaping hole in the membership and revenues of the Financial Services Council (FSC).

By some estimates, the exit of members of the scale of TAL, AIA Australia, MLC Life, Metlife and others will deny the FSC up to 50% of its annual membership revenue unless some of the insurers choose to continue with their FSC membership at the same time as underwriting the establishment of the Council of Australian Life Insurers (CALI).

Conversations between Financial Newswire and senior life insurance executives suggested that few insurers would be inclined to paying to support two representative organisations in circumstances where annual membership can run into six figures.

A reading of the list of full members of the FSC reveals the significance of the insurers’ exit, with the list including Zurich Financial Services, TAL Limited, Swiss Re Life and Health, SCOR Global Life Australia, RGA Reinsurance Company, Resolution Life, Pacific Life Re, NobleOak, Munich Re, MLC Life Insurance, MetLife Insurance Limited, Integrity Life, HCF Life Insurance, Hannover Life Re, General Reinsurance Life Australia ClearView, AXA Life Re, Allianz Australia Life Insurance and AIA Australia Limited.

The bottom line is that the things which drove the life insurers into what became the Investment Financial Services Association (IFSA) which then evolved into the Financial Services Council 24 years ago, no longer exist. The major life insurers are no longer multi-faceted, vertically-integrated businesses covering insurance, advice and wholesale investment, today they are mostly simply focused on life insurance.

And factors such as legislative change, the exit of the banks and the fall-out from the Royal Commission into Misconduct in the Banking, Superannuation Financial Services Industry also played a role.

The regulatory environment in which life insurers now operate is now more aligned with that of general insurers than it is with that in which other members of the FSC continue to operate.

While a significant blow to the FSC, the exit of the insurers will not have come as a surprise to the organisation. Financial Newswire understands that it is something which was canvassed over a number of years but which only really began to take shape over the last 18 months.

What is more it is not something reflecting upon the current leadership of the FSC, it is something which evolved as the legislation and regulations driving the financial services sector changed.

Perhaps ironically, the very things which have changed the relevance of the FSC as a representative organisation for life insurers are also the things which have changed the underlying relevance of the Life Insurance Framework (LIF).

As things now stand, the FSC seems destined to become an organisation mostly representative of fund managers, investment houses, platforms and a handful of financial planning licensees.

Fifteen years’ ago there was talk of the FSC becoming the over-arching representative body for the financial services industry. Today, as the major financial planning and accounting bodies act in consultation on the Quality of Advice Review that aspiration seems a long distant memory.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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1 day ago

Given what the members of the FSC have done to financial planners it is hard to feel sympathy for them. Let’s hope they rot prior to doing more damage