July 1, 2016
The Life Insurance Customer Group (LICG) has continued to question the motivations of the Financial Services Council (FSC) following recent reports it has continued to push for a carve-out for direct insurance.
In a statement released by the LICG, the group questioned why the FSC would engage in this behavior when it had still yet to produce any evidence of churn within life insurance or any significant consumer benefits stemming from the Life Insurance Framework (LIF) reforms.
The LICG questioned the justification for the FSC’s position and actions so far, listing a number of areas where it believed the FSC had failed to prove its case.
“The FSC has not provided any evidence, reason or data on which to base their ‘reform’ recommendations,” the LICG claimed.
“Their commentary constantly points to a proposition of ‘churn’, not concern about quality of advice on any other basis, not industry sustainability…and not professional education standards.”
“Their commentary constantly points to a proposition of ‘churn’, not concern about quality of advice on any other basis, not industry sustainability, not the systemic poor institutional culture that Messrs Medcraft and Kell keep talking about and the media continually provides evidence of, and not professional education standards,” the group said.
“The FSC didn’t look for, or measure, any of these things when they directed ASIC in Phase 1 of the ASIC research. And for the record – it would appear that ASIC didn’t ask anyone but members of the FSC to assist in Phase 1 when they were designing their research project!”
In the statement, the LICG expanded on its claim the FSC was unable to justify its position on churn and noted that pending ASIC research in 2018 would be used to provide evidence of churn, after the reforms, which were to combat the issue, were already in place.
The LICG pointed to a statement in the FSC’s submission to the Scrutiny of Financial Advice inquiry conducted by the Senate Committee on Economics that read: “We note that further investigation by ASIC will be needed to tell the difference between those advisers ‘churning’ policies and those advisers acting in the best interests of clients”.
In response to this the LICG stated the FSC was looking to ASIC to substantiate churn and to justify its reform measures which addressed an implied churn problem and nothing else.
“The LICG asks: Is it possible that the FSC has used ASIC to manufacture a justification to blame 23,300 advisers for an unproven issue so as to deflect attention from insurers’ behaviours that are proven to be so detrimental to consumers?
“We ask – how has the FSC managed this – despite NOT having any evidence for ‘churn’, despite NOT actually having defined ‘churn’, without explaining how a drop in adviser remuneration can result in a consumer benefit that only insurers can provide, when there is no obligation on insurers in LIF to do anything?
The LICG also said reports the FSC had “…orchestrated a carve-out of ‘Direct’ behind the back of the AFA and the FPA, and Minister O’Dwyer” were part of a series of unanswered questions alongside those of the consumer benefits of the reforms, the evidence of churn and the need for LIF legislation instead of taking the issue to the Australian Competition and Consumer Commission.
The statement is the third from the LICG in as many months with the FSC yet to make a formal response to any of the statements or the claims within them.