This week one of the most prophetic statements was made at the Royal Commission when Mr Martin, Clearview’s Chief Actuary and Risk Officer, admitted that “it is virtually impossible to sell life insurance over the phone in compliance with the relevant financial services laws”. Not only is it an important observation based on all of the evidence, or should I say, exposure that has occurred recently in the Royal Commission, but it provides an observation that should form an underlying basis about how we as an economy move forward from the situation this industry, and in fact others, are currently in.
The fundamental issue at hand is not so much what has been observed, which is the evidence, but in fact issues that go to the basis of how we write laws in this country. That being the complexity that appears to be deliberately built into legislation from the very start. Presumably the complexity is meant to provide theoretic advantages, but the reality of such advantages are in my mind questionable.
On one hand the complexity will benefit those that can afford the relevant advisers to map a detailed course through the quagmire, and then fund and maintain a system to conduct activities accordingly. It would also benefit risk takers who would simply rely on little or no regulatory oversight. The complexity would also benefit the regulator in that they could be almost guaranteed to identify a breach should they choose to conduct an examination of virtually anybody; humans being human that is! Thus in the latter case it then becomes an issue for those who are reviewed versus those that are not. If you are reviewed you are ‘busted’, if not you carry on regardless.
Clearly what the Royal Commission has identified is that these circumstances are not isolated or exceptional, they are commonplace. They are essentially incapable of human compliance hence Mr Martin’s comment above.
When one properly conducts a risk assessment, which would properly identify that the risks to the community are such that there is a large part of society that are potentially exposed to inappropriate treatment, then that risk must be mitigated. This is particularly so when the situation dictates that there is no independent advisor between the vendors, a commission fuelled employee, and the target. With this level of risk a law that simply banned the process would not have been inappropriate: from the media, and more so public sentiment, it certainly appears to be on the table now.
The more complex the law, the more open it is to be thwarted and misused, the more complex a law the more costly it is to enforce, the more complex a law the more unfairly it may be enforced. With the advent of computer data processing, and the increasing ease with which data can be stored, and sorted, and indexed, and manipulated it will be those that control it that will rule; for right or wrong.
I remember many years ago when Dr Edelstein was being challenged about medical referrals he was seen on the TV holding a huge computer printout uttering words to the effect that “I can prove that we have never been outside the normal percentage of General Practice referrals to pathology, etc.”. If you only refer when it is absolutely necessary then the percentage is properly irrelevant. It beggars the question that why was it necessary to prove this, or was it more important to have a system to ensure that referral opportunities were not lost?
We are probably on the verge of a need for reform in the manner legislation is created, the alternate will no doubt be a steady flow of eye opening and revealing Royal Commissions. Certainly not the way to run a business, nor a country me thinks!
The fair application of the law is becoming increasingly difficult and costly, just ask any liquidator. The way of the future will be clear and precise with properly constructed legislation that truly serves the community as a whole, equitably.