September 19, 2017
The AFA has called for clarity around reports on the quality of advice and the level of churning after conflicting messages have sent by ASIC in recent weeks.
In a statement to members, AFA Chief Executive Phil Kewin said members had received “…conflicting messages with respect to ASIC’s view on the state of the life insurance advice sector”.
Kewin referred to statements made by ASIC at a hearing of the Parliamentary Joint Committee (PJC) Inquiry into Life Insurance and written responses to Questions on Notice to the same inquiry.
“The first report referenced statements by ASIC suggesting that the number of advisers suspected of “churning” was less than 50,” Kewin said, adding “…a later report referenced statements by ASIC that recent surveillance has reflected similar rates of non-compliant life insurance advice to those reported in ASIC Report 413.”
Kewin said the report had generated concern among AFA members and “…the first report suggested that there is not much of a problem, whilst the second report suggested that nothing has improved” prompting the AFA to seek clarification from ASIC and the office of the Minister for Financial Services, Kelly O’Dwyer.
“We want to emphasise that we are still…seeing some problematic advice around life insurance in the surveillance that we undertake…”
ASIC sought to clarify its comments to the PJC around churn during a hearing of the House of Representatives Standing Committee on Economics last week. At that time, ASIC Deputy Chair, Peter Kell said earlier reports that only 50 advisers may be involved with churning were inaccurate.
At the hearing, Kell said as part of the life insurance reforms ASIC was now able to collect data about advisers with high life insurance lapse rates which it could use to identify high risk advisers who were inappropriately switching customer policies.
Kell added that as part of the initial data received by ASIC, it had identified around 500 advisers with potential issues around higher levels of lapse rates and had narrowed that group down to a smaller pool for its first round of in-depth surveillance.
“I think some of the media articles suggested that that means it’s only those people who are possibly causing problems. We want to emphasise that we are still, unfortunately, seeing some problematic advice around life insurance in the surveillance that we undertake. It’s not limited just to that smaller target group that has come up through our first data-gathering exercise,” Kell said.