ASIC Releases New Sample SoA for Life Insurance

ASIC has released a new sample Statement of Advice (SoA) for life insurance which highlights prominent and upfront disclosure of commissions while omitting a range of disclaimers and warnings.

The regulator released the sample SoA along with a new consultation paper which details proposed changes to Regulatory Guide 90 (RG90) which covers the creation and use of SoAs in limited advice situations.

In releasing the sample SoA, consultation paper and draft changes to RG90, ASIC has also given the financial advice sector a one-month window to provide feedback before making further changes ahead of a final release in September 2017.

ASIC said the consultation paper sets out the rationale for updating RG90 which would result in the current example SoA being replaced with a new example SoA for scaled advice for life insurance for a new customer in the regulatory guide.

The consultation paper stated that despite ASIC’s guidance on SoA’s “…many financial advisers were still producing SoAs that were too long and complicated” and shorter SoA’s were recommended as part of the Trowbridge Report and the Life Insurance Framework reforms.

“We believe that an SoA should be confined to explaining the advice and the basis for the advice.”

“SoAs that are too long and difficult to understand detract from customer engagement and may lead to poor decision making,” the consultation paper stated, adding that in the development of the new example SoA, ASIC has used simple, plain language and a structure that is easy for customers to follow.

The paper also stated that ASIC looked to reduce the length of the example SoA by excluding unnecessary information including disclaimers, warnings, financial product information and information about financial services provided.

ASIC stated these belonged in product disclosure statement and financial services guides and it had “…excluded this information because it is not designed to help the customers understand (and decide whether to rely on) personal advice.”

“We believe that an SoA should be confined to explaining the advice and the basis for the advice. This means that we have not included any information in the example SoA that does not satisfy this purpose”, the regulator stated in the paper.

The new SoA was designed using behavioural research into how people find and understand the information in SoAs, ASIC stated, before being tested with small groups of consumers and advisers.

The sample SoA, consultation paper, and draft regulatory guide is available here and comments close on 31 July.

  • Jeremy Wright

    The ASIC example SOA, does not initially focus on a clients best Interest around
    Insurance and it’s importance in the clients life, instead it focuses in the first sentence and all of page one, on what commission the adviser will get, full stop.

    It does not even mentions what type of cover, or the amounts of cover the clients should consider. The whole of page one is about Commission.

    Page 2 is the table of contents.

    Page 3 has 2 sentences of what Insurances and the amounts both clients should have, then goes straight into the premium.

    Two sentences in one paragraph does not present the need and reason why the clients should take out Insurance, though by pushing a premium in front of their face
    before the adviser gets agreement on their current Financial position and current, plus future risks, immediately causes clients to decide there and then on what they think they want to pay, not to base their decision on considered research, which takes the adviser practice anywhere from 10 hours to 30 hours over a period of weeks to get to the SOA being ready to present to the clients, stage.

    ASIC has not taken a real life, face to face sitting with a client perspective, which has led to a “cart before the horse” SOA.

  • Greg F

    There is no reason other than downright cynacism and a ‘hope that we fail’ that commissions are seen by the regulator as the first and foremost item to meet the clients eye. What other possible reason is there? Really, they are hoping that the client becomes sceptical about the process from the outset. How does this in any way help the process of someone deciding to accept the advice or not? Is it intended to give the customer a feeling of ‘I must be about to be fleeced here’. The premium is what the customer pays and even this should not be the focal point of the document. If someone is buying on price alone then they are getting bad advice. If you are seeing a doctor about a major illness, is the first thing the doctor tells you how much he is going to make out of the exercise? They haven’t even had a chance to read the document FFS! And what if its level commission, versus upfront versus hybrid, how is the client supposed to differentiate? They just see a dollar amount and assume it’s all mine. And if commission has to be placed on page one, then what about all the expenses that then come from that payment? And what about including predominat statements saying we will have to pay back all or most of this money if the policy is cancelled – for whatever reason. No, why lessen that the impression that the client will receive where they think all of that commission goes straight into my back pocket so i can spend it on fast cars and cigars. Who gives these morans the right to dictate our lives in such a way when no other industry is required to do so. I hope the AFA don’t accept this for one second. Oh, and BTW, the SOA is still too long IMO.

    • Warren B

      Well said Greg.

  • Alleycat

    Do any of these rocket scientists at ASIC know that by excluding such things as Disclaimers,Warnings etc, leaves the adviser open to be sued.
    What a stupid way to think !!!

    Leaving out Financial information and financial services provided is not in the realm of the PDS but enshrined in the Corporations Law and in the LIF legislation under “Clients Best Interests”
    Earth to ASIC,…. where ever you are,…. come back to earth where the real people on this planet live.