The draft standard on approved product lists (APLs) released by the Financial Services Council (FSC) proves the life insurance industry was incapable of self-regulation and would achieve little for the best interest of consumers, according to life insurer ClearView.
Responding to the release of the standard (See: FSC Releases Draft Standard for APLs), ClearView Managing Director, Simon Swanson said the draft standard was a wasted opportunity to deal with glaring conflicts of interest that lead to poor client outcomes and would allow sub-par practices to continue.
“Open APLs are essential if advisers are to provide objective advice in the client’s best interest however the FSC’s dependent relationship with the dominant, vertically-integrated players means that there will be no meaningful progress in the absence of regulatory action,” he said.
Swanson was also critical the draft standard imposed only two requirements on advice licensee members of the FSC – applying a reasonable basis to APL construction with a range of insurers; and to have a process for advisers to make a recommendation for a product from outside an APL.
He said the requirements lacked guidance as to how broad an APL should be and mirrored the current status quo among large institutionally-owned licensees which used their discretion to enforce narrow APLs.
“…the FSC has produced a superficial document that will fail to stamp out anti-competitive practices…and therefore won’t lead to profound, lasting change…”
“Despite being charged by the government 18 months ago to develop a new APL standard for the delivery of greater product choice and accessibility for advisers, the FSC has produced a superficial document that will fail to stamp out anti-competitive practices by the large vertically integrated institutions and therefore won’t lead to profound, lasting change and a better deal for consumers,” Swanson said.
The draft standard also ignored the recommendation of the Trowbridge Report that APLs should include at least half of all life insurers and the issue of shelf-space fees, he said.
Swanson also claimed the draft standard pushed against ongoing efforts to improve the professionalism of advisers and did not allow them to use their education, experience and professional judgement to recommend the most appropriate solutions for clients.
“It’s counterintuitive to ask advisers to be degree qualified, meet continuous professional development obligations and professional standards but dictate to them the products they can and can’t recommend,” Swanson said.
“Open APLs are critical if the industry is to better manage the conflicts inherent in the vertically integrated model, remove the product-flogging stigma, gain the trust of consumers and establish itself as a bona fide profession,” he added.
Swanson said ClearView would continue to petition the Government for mandated open life insurance APLs for all advice licensees and is currently preparing a formal submission in response to the FSC Draft Standard.
