The federal government has put financial advisers on notice, saying they must take urgent action to reform the troubled life insurance industry.
Speaking in Sydney, Assistant Treasurer Josh Frydenberg said the financial services sector had only a "couple of months" to address issues, including quality of advice and commissions paid to advisers related to life insurance products.
"Appropriate reform made as soon as possible must be led by the industry itself," Mr Frydenberg told a Financial Services Council breakfast on Wednesday.
"Industry should not force the heavy hand of government to act.
"The extent to which we intervene will ultimately depend on the industry's response."
Mr Frydenberg's comments follow a number of reports on the sector, the latest by former Australian Prudential Regulation Authority member John Trowbridge, which recommended an overhaul of life insurance rules to address serious failures.
One key recommendation was a cap on adviser commissions of 20 per cent, with an upfront fee of $1200.
Mr Frydenberg said the Trowbridge reforms were "all worthy of consideration" in what was a wide ranging speech that also covered superannuation, tax policy and how to promote Australia as a financial services hub.
"It's up to industry to say, 'Let's move to away from upfront commissions. Let's move to level commissions'," he told the event.
"If we are going to have an upfront fee as Trowbridge recommended, let's agree on what that ... should be."
He said if the industry did not act, the government would likely be forced to crackdown on the sector.
"We then will then have to agree on a course of action which may involve further government regulation. We would prefer not to do that."
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