A financial advice industry veteran has called for a return to the mutual model, saying the sector has lost focus and a sense of purpose.
Property Funds Management Australia chief executive Barry Daniels has said there is still hope for the industry, but it requires reverting back to its beginnings.
"Although it's impossible to undo the failures of history, there is hope for the future of financial services with a modern-day adaption of the mutual life insurance model to restore much-needed certainty, trust and confidence to the insurance sector," Daniels said.
He explained that for nearly 150 years the financial services industry in Australia prospered from the life insurance mutual companies.
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Daniels said that from the 1990s during a steady stream of amalgamations and buy-outs the industry lost its sense of purpose and abandoned conservative principles.
"In hindsight the post mutual era has been a disaster and with major banks announcing they are jettisoning their wealth/insurance arms and many like the AMP restructuring and downsizing their adviser networks," Daniels said.
"Industry and consumers are justified in asking what exactly has been the benefit of industry vertical amalgamation and government intervention."
Daniels is of the opinion that because mutual companies share profits with policyholder members they need to be aligned with the best interests of their policyholders.
"This differs from the current bank owned model that sells and markets products to generate profits/dividends for their shareholders without necessarily benefiting policyholders," Daniels argued.
"Furthermore, the profits of mutual insurance companies are distributed to policyholders in the form of lower premiums or bonuses on policies."
He said the Hayne Royal Commission highlighted the depth of reputational damage in the life insurance sector and industry more broadly.
The revelations around conflicted financial advice and denial or avoidance of life insurance claims that were highlighted during the Commission, Daniels said, stress the misalignment of internal interests within financial institutions.
"The growing strength of the mutual model in global marketplaces has affirmed my belief of its re-emergence and inevitability in a modern-day format in Australia," he added.
Daniels has also published a whitepaper on arguing for the return to a mutual model in Australia.