The Financial Services Council (FSC) has released a draft standard around the creation and maintenance of life insurance approved product lists (APLs) but has not mandated a minimum number of products or how APLs should be constructed.
The draft standard, which is open for consultation until mid-May, requires FSC members to create life insurance APLs with a choice of providers and the ability for advisers to choose products outside the APL where they are in the best interests of clients.
The number of products on offer under an APL, and the life insurance providers, would be disclosed to consumers in their Statement of Advice but the draft standard did not go in details as to the optimal number of products or providers that should be included on an APL.
Rather, the draft standard stated that an APL should provide a range of options so advisers can deliver advice in the best interests of their clients and FSC members “…must apply a reasonable basis to APL construction”.
“…the draft standard stated that an APL should provide a range of options so advisers can deliver advice in the best interests of their clients…”
“This requires consideration by the licensee of whether the APL will reasonably enable financial product advice to be given to a client consistent with the best interest obligations, having regard to the need to prioritise the interests of the client, and the obligation to provide appropriate advice,” the draft standard stated.
In setting out guidelines around constructing an APL, the FSC said these were not mandatory but FSC members should consider them as best practice and determine what was reasonable for their own particular circumstances.
The draft standard recommended an APL should be reviewed at least biennially and consider the claims and underwriting philosophy of providers, product features, benefits and consumer value for money and relevant product research and service metrics.
The standard will be compulsory for all FSC members once approved and commences on a voluntary basis from 1 July 2017. Full compliance with the standard will be required by FSC members from 1 July 2018, while a review of the standard set for 18 months after its commencement.
Why does the FSC not make it compulsory for open life insurance APL’s for all AFSL’s?
I guess if the FSC doesn’t have the intestinal fortitude to make a stand to clean up the industry, from the top down, then the legal fraternity will have some fun in a few years time when the first insurance claims under the new legislation start hitting the claims desk. It won’t take long for an experienced legal practitioner, specialising in insurance, to take an AFSL to task on whether they offered the most suitable product, especially if the AFSL only have 1/3 the number of available insurers on their APL.
And no, having a clause to say an adviser can go outside the APL is just a cop out. Honestly, how many advisers working under the big banks umbrella could confidently and consistently request approval to go outside their APL?? They would find themselves under a great deal of pressure, and eventually most likely out of work.
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