Lapse Data Suggests Churn Numbers May be Low

The number of advisers engaged in churning life insurance policies may be relatively low, according to ASIC, which has claimed recent lapse data gathering activities are providing a clearer picture on the issue.

ASIC Deputy Chair, Peter Kell

ASIC Deputy Chair, Peter Kell

Appearing at a recent Parliamentary Joint Committee on Corporations and Financial Services hearing into the Oversight of ASIC, the regulator was questioned by PJC member Jason Falinski as to why it had not adopted a targeted approach to dealing with churn as identified in Report 413.

“Rather than regulating the entire sector…maybe a more effective or surgical approach would have been to identify the people who were doing it and either alert them to the fact that they were doing it and they would stop, or manage them out of the sector,” Falinski said.

In response, ASIC Deputy Chair, Peter Kell said the ability of ASIC to better identify advisers who were churning was a result of successive reforms that followed Report 413 which has since allowed ASIC to collect lapse rate data from life insurers.

“It’s still fairly early days, but what it has allowed us to do already is to identify a population of advisers that are potentially at risk of being in that category,” Kell said.

“I think it was around 500 to start with. But, after applying a range of filters, it’s allowed us to work that down to a much, much smaller number…”

“I think it was around 500 to start with. But, after applying a range of filters, it’s allowed us to work that down to a much, much smaller number, and you can have a much more targeted and focused look at a much smaller number of advisers rather than a more scattergun type of approach,” Kell added.

“That is now in train. I think we’re doing the follow-up work on that much smaller number. It’s less than 10 per cent of the initial pool of advisers where there may be a much greater risk.”

Also speaking at the hearing ASIC Commissioner John Mr Price said there was a good opportunity to adopt more targeted approaches “…but, to do that, you really need a good data set, and we do not always have that at the moment”.

In the past, ASIC stated it had difficulty in determining churning as it was not able to determine the reason for a policy being moved or changed (see: ASIC Admits Churning Numbers Difficult to Quantify).

The regulator is currently collecting claims and lapse data from life insurers, in conjunction with APRA, as part of its requirement to monitor the sector under the incoming Life Insurance Framework regime and release a report in 2021 (see: Regulators Begin Collection of Claims Data).

The comments from ASIC reflect similar numbers gathered by the New Zealand financial services regulator, the Financial Markets Authority (FMA), which found churn was likely only among a handful of advisers in that market (see: NZ Regulator Claims Churn A Minor Problem).

As a result of these findings, the New Zealand Government opted to retain life insurance commissions in their current form (see: Risk Commissions in NZ to Stay).

  • BKY

    This just proves what everyone originally thought of Report 413…a witch hunt based on flawed data and hypothesis. That was Millions of dollars well spent (oh wait-a-minute…that’s right it’s now being funded to the tune of $1,000 pa per Adviser…this strategy of ASIC’s of having Advisers fund them is likely to be flawed also because the way it’s progressing, there won’t be many Advisers left…but then again I guess those Advisers that remain will pay $4,000 – $5,000pa) Why didn’t ASIC just ask the Insurance companies who the notorious churners were…they had and still have the knowledge. Maybe we Advisers can start a class action of our own…

    • Totally Frustrated Risky

      What, and use common sense? Not on your life BKY!!! No chance of that here…

  • Adam p

    And the whole basis of LIF now starts to be shown as mostly a complete fabrication by the Banks, Insurance companies and FSC to reduce adviser income and allow institutions to try to flog more dodgy direct insurance.
    ODwyer and Frydenberg as ex NAB institutional employees were more than happy to play the charade for their institutional buddies.
    How ASIC allowed it to happen is a disgrace of so called independent regulators.
    What an absolute farce from these pollies, ASIC and Institutions.

  • GregF

    So we change the law, then investigate the claim upon which the law was changed, then discover the claim is false? So it would be only logical that the law be repealed, yes?

    • Totally Frustrated Risky


  • Christoph Schnelle

    Interesting what consequences some 50 churners can have for all the other advisers and how the insurance companies used the fact of churning while never giving out the underlying data.

    It is what happens when a group of people (advisers) have reputation issues and hence no strong lobby as those lobbying are busy fighting fires rather than being able to make demands like asking to substantiate churning allegations.

  • WarrenB

    This is absolutely disgraceful on the part of ASIC! Mr Kell and Mr Price – hang your heads in shame! You have created absolute mayhem these past few years in the Australian life insurance industry because you did not do your job properly.

    • Squeaky_1

      Yeah Warren and to make you feel a little better WE all paid their wages/income while they lolled around doing all this idiocy. As someone said above here, all these glorified public servants should be forced to work in the real world, run a business at least once or something before they get a free pass, free taxpayer funded income each month and settle into their taxpayer funded armchairs in the taxpayer funded offices. They’re too busy shovelling their flat pink little noses into the taxpayer funded trough to do any real good for our industry, advisers or clients. Client best interest? What an absolute sickening joke. ASIC don’t care – if the did they simply wouldn’t be behaving like this!

  • Baffled

    “The number of advisers engaged in churning life insurance policies may be relatively low”

    In other breaking news, man lands on moon.

  • Jeremy Wright

    New Zealand was able to identify a possible issue, quickly and inexpensively investigate it, with little impact on the wider community who were always doing the right thing and they made some minor changes that called out the minority of advisers doing the wrong thing.

    The Australian version will go down in the history books of how NOT to investigate a possible issue, which has led us to years of chaos, Government and Industry intervention, that violates the very principles of an honest approach, to what has turned out to be a lot of smoke screens and mirrors.

    Australia seems incapable of and refuses to learn from other Countries experiences and instead will blow billions of dollars of Tax payers money to do it their way and as we have seen from just the Life Insurance fiasco, Australia has a major problem with the way the current Government and Public service sector do their jobs and who appear to live in a bubble of keeping themselves employed, by creating more complexity based on ticking boxes with no interest or capability of actually making things better.

  • emkay

    Absolutely disgusting ASIC – you were led by the nose by the self-serving FSC. ASIC are like uneducated children playing in an adults world. Clearly, clueless public servants should be required to work in the real world before working in a workforce where there are no ramifications for gross incompetence. And now we need to pay these fools each year, for what exactly?

  • Where’s The Integrity?

    News Flash! ASIC aren’t interested one bit in the truth with churning advisers!

    The likelihood of honest advisers, who bust their absolute gut to do the right thing for their clients each day, being treated with any respect by this completely biased regulator is next to nothing in my opinion.

    The fact they brag about the scalps they get each day proves that in my opinion – unless they start promoting the good news stories that is.

    I said this to a life insurer BDM yesterday – I liken them to a flock of ducks flying over the top of your nice clean car as you cruise down the highway, only to dump all over your windscreen so you can’t see the view anymore (aka what we’re all trying to do for our clients).

    All ASIC do is criticise and look for fault – nothing else. That’s their job so how can someone that’s paid to do that, not continually find fault to serve their own interests?

    Despite the fact they handpicked the data they used for Report #413, we told them the churning numbers were low and we told them to target the churners instead of throwing a blanket of onerous rules and regulations over the entire industry that would inevitably cripple it. Did they listen – no? Do they care – no.

    ‘Nuff said…!

  • Ken

    I have a dog I laugh my “guts” up about watching him chase his own tale completely unaware of the consequences if he catches it ! Sound familiar Kelly Odwyer josh Fredenberg if you were not so busy chasing your own tales you might have taken the time to get a subjective view of what was being proposed by ASIC the FSC and the banks but know you accepted it was not your own tale you were chasing and were led astray of the real purpose of this ” flawed” legislation
    I hope it hurts when you bite it

  • Shackuddha

    This makes my blood boil….. and they blame advisers for lack of consumer confidence. Go figure! someone needs to answer for this. And what about the AFA and FPA. what a great job they did in protecting advisers. The backroom conversations and under the table dealings that would of went on for this legislation to be passed would be mind blowing. Some people should not be able to sleep at night. At least the insurance companies got what they wanted which was what this was all about, wasn’t it??

    • BKY

      Blood is boiling…reading your view made me instantly ponder why our Fearless Leader Brad Fox has left the building???

  • GenXPlanner

    What an absolute disgrace. The AFA/FPA should hang their heads in shame for letting down their industry like this whilst this all happened.

  • Jimmy

    This would be the only occassion where i’d consider calling the lawyers to start a class action against ASIC for their poor performance in this whole charade.

    I’d also be having “cracka at Wacka” because all this information was provided to National’s Senator John “Wacka” Williams who intimated that he knew more than what he was saying in the press and that we should ‘trust his chairmanship’ of the PJC to get matters resolved. His performance has been solely about having a public crack at the bank’s for the benefit of his constituency, while privately delivering them greater control of the finance and insurance markets and higher profits.