- Create an industry-wide black list for ’serial’ churners (23%)
- Offer more attractive remuneration to advisers for upgrading existing policies (19%)
- Offer ‘quality’ incentives to advisers for maintaining low lapse ratios (17%)
- Institute a consistent adviser responsibility across all insurers (13%)
- Remove takeover terms for all re-issued policies (12%)
- Ban upfront commissions on replacement policies only (8%)
- Ban all upfront/hybrid commissions but allow level commissions (6%)
- Ban all commissions (2%)
Creating an industry-wide black list of serial churners has been the highest rated selection by advisers from a list of proposed solutions that address the practice of churning.
53% of respondents included the adviser black list option within their selection of proposed solutions, while the least popular choice was to ban all commissions (only 4% included this option).
Following the black listing of serial churners, the next most popular solution so far (with 44% support) is to offer more attractive remuneration to advisers for upgrading existing policies, followed by 41% support for the notion of offering ‘quality’ incentives to advisers for maintaining low lapse ratios.
There has been a level of support for the two initiatives set out by the FSC in its recent churning announcement:
- Application of a consistent adviser responsibility across all insurers
- Removal of takeover terms for all re-issued policies
To date, these initiatives have been supported by 34% and 32% of our poll respondents respectively.
While we received many comments for and against the range of solutions we tabled in this poll, we continue to receive many comments from advisers who object to being considered as churning business if their clients cancel an existing contract for a new one, but where this results in the client’s best interests being served.
We reiterate that the vast majority of policies that are cancelled and re-issued are in the best interests of the client and do not meet the definition of churning, which relates only to those re-issued policies that are transacted in order to access additional remuneration.
But issues such as churning are rarely black and white. For example, Synchron Director, Don Trapnell, believes the term itself has morphed into a generic term that describes all policies that are cancelled and reissued.
Mr Trapnell believes the entire adviser community is being unfairly ‘tarred’ with the churning brush, but where, in reality, the vast majority is providing much needed and appropriate wealth protection solutions for the clients it serves.
Instead of simply addressing solutions to the practice of churning, Mr Trapnell is also calling for the industry and the public to be on the same page when it comes to defining the term, both what it is and, just as importantly, what it isn’t.
We also acknowledge that the solutions we offered in this poll are not a definitive list. Rather, they are the themes we have identified in speaking with advisers, licensees and life companies. We would welcome your additional suggestions and points of view, all of which will contribute to this debate. Our poll remains open for another week…
We (advisers) do not need additional incentives to increase an existing policy – we simply need life companies to make increasing a policy easier. It is currently a nightmare and most are not set-up internally to cope with it. In fact I would go so far as to say if a life company policy administrator received an application to increase they probably don’t know what to do with it. IT IS THAT BAD. If there is any basis to “churning” this is most likely a ‘significant’ contributing factor. Put the pressure on the life companies to get this process right and I am sure the rest will fall nicely into place.
The adviser has a fiduciary interest to review insurance policies on a regular basis to see if the policy terms, and conditions, are the most suitable for the client.
If after this analysis , it is in the clinets best interests to change insurer , the adviser has an obligation to the client to do this.
The term churning is slanderous , under FOFA where an adviser has a fiduciary obligation to the client and clearly states why a replacment contract is applicable in the SOA , the focus should be on why clients dont review their insurances rather than the slur that takes place when an insurer loses to business to another insurer who has a more cost effective or improved contract.
Chruning is a misused term. We review & change clients policies where there are better policy conditions and premiums available – if this happens reasonably regularly or irregularly will be dependant on the client’s situation, insurability and options available. At no time is a policy stopped until full cover is in place. To be honest I don’t give a rats a_r_s_e if this is ‘churning’ as it is right for the client and only the uncompetitive insurers are affected. Sue me for doing the right thing!
Maybe we have a uniform price by all insurers so that price does not become the issue, but then theres the product, and we all know they are not the same, so god help us while the government and the insurance companies stuff a perfectly good industry until there is no one doing risk insurance then the government might wake up and the insurance companies will definitely take notice.
some excellent points from Don Trapnell and Anthony Monaghan. With improved offerings of non-standard benefits with trauma insurance, as an example, a simple tweak to include an extra benefit can require full underwrting. For that level of work, why not look for a better policy all round and swap to something that offers more for the same cost or even less. I don’t consider this churning, but acting in the client’s best interest.
From an Insurance companies point of view if a policy leaves them it is a CHURN, if it comes to them from another insurer it is QUALITY NEW BUSINESS.
Can’t have it both ways can they, best they get their own houses in order before they start bashing the advisers.
Agree with Don Trapnell…the word carries its own conatation and that those who have a business plan based on survival and regularly changing insurer, are the ones to be counselled. Not helped at all by the Insurers who support the “strategy” for their own short term gain.
The over-riding comment that we must be aware of is that the pixies in purism are watching and we dont need more intervention because of the usual suspects.
One thing that astounds me is that it is impossible to grow the VALUE of your business if you keep circulating the same dollar!!That is my contention, that true “churning ” is about business survival and not at all about client best interest. There is one hell of a difference.
Who on earth came up with this idea? Churning what Insurance company is pushing this I wonder?
The changing from one product provider to another is and should always be in the interest of the client. I change some clients every 2-3 years why?. Simple, definitions premiums, occupations, personal circumstances etc etc etc. If changing from one company to another is not a disadvantage to the client then what is your problem?.
Oh those who change and disadvantage the client, yes they should be banned for life the client should always come first always and always gain an advantage and not be disadvantaged.
Underwriters change, BDM’S change relationships change companies change, You might like one company and yet have no luck with the new company that took the other company over, what are you going to do? You might like a company and the new BDM no longer wants a relationship. The premiums may go up 20%, the Insurance Companies S&P rating could move to a B from an A, The senior management might change as it has with mergers, The reasons for change are not always Churning, if it is an issue then that is what an audit is for. Get a life who ever thought of this idea.
Churning for commission needs to be the responsibility of the Dealer Group not the insurance companies who I will add do it anyway.
Insurance companies can refuse to deal with people however a blackband list allows for the insurance companies to have more power than they should have.
The company behind this suggestion is the company that wanted to ban commissions all together however it did once and the back lash was to great so its going about it a different way well if I only had the guts to name you
Is just me or is this industry becoming the most over regulated under appreciated and most expensive to operate in.It seems to me that the masses are blamed for the actions of a few by those who have no idea.
Dammed if you do, dammmed if you don’t. Churning, interesting word. What Does Churning Mean?
1. An unethical practice employed by a sales person to increase their commissions by excessively trading in a client’s account or reselling. Whether it be shares, insurance or whatever. It is also referred to as “churn and burn”, “twisting” and “overtrading”.
Yet as a financial Planner, we are morally obligated to review our clients insurance needs at least annually or biannually. If an insurance company in this time happens to review their rates or offer a better policy defintion that fits this client’s criteria, and a Risk Research anayalis happens to confirm this option is a better alternative to consider, even though his current policy was only written 12 or 18 months ago. Client has no changed circumstances that will impact on this change, therefore am I not morally obligated to offer my client the best that is on offer in the market place for his needs. If I don’t, and Joe X the Fin. Planner from XYZ Co. rolls up & talks to my client, or the client decides he wants to do an online check for himself. Where does that leave me as this client’s Fin Adviser. If by changing this policy for this client’s best interest, & I am paid comm. by the insurer, that is fully disclosed in the S.o.A. to the client. Am I a “CHURNER” Even if this was done every two or three years for the client’s best interest.
Is it not the insurance company’s themselves that entice us to sell their products because of the changes they make to recommned that we sell their products to our clients, to increase their market distribution levels. Maybe after 28 years in this business, I have lost the plot prehaps.
I thought the client’s best interest was our main agenda to be concerned about.
As it is, most Australians are underinsured, or have none at All.
I ask you the question, the next time you see a client and review his insurances, if you are able to save that client money or offer a better product. What will you do?
I know what this CHURNER will do. It appears that must be my new name.
Churning? Are you kidding me, more pointless smokescreen from self-appointed authorities Choice, John Brogdan at FSC and Geoff Summerhayes at Suncorp. Clowns. High on rhetoric and low on facts again.
When was the last time they had a legal and moral obligation to look after a client and their family? Never.
When was the last time they held a widows hand during a claim? Or delivered a mortgage eliminating cheque to a client undergoing chemo?
As Matt said above, go get your own houses in order.
They have the luxury of ill-informed opinion amplified by PR firms, where we have our advice put to the blowtorch of reality, quietly on a regular basis.
Grow up and bugger off.
Why is it that when insurance consultants, (who are required to attend to client’s changing situations and actually EARN whatever it is they make in, (can I say this word publicly or is it considered foul language these days?), ‘COMMISSION’ run the risk of being labelled ‘churners’ – but when BANKS encourage clients (MY clients) to change their cover it’s considered a public service.
Presumably because the consumer seems to think banks do not earn commission from the insurers who probably own them – and who have NO capacity to provide consumers with comparitive quotes.
agree with Don Trapnell—-we or some of us remember the word “twisting” no not Chubby Checker’ BUT THE WORD used by the giants of the past National Mutual & AMP especially when the ‘Unbundled” policies were introduced and these two companies insisted on continuing to promote ‘Whole of Life” as the only solution to clients needs as well as offering 10% only on term Life contracts.———–I left and was happy to offer the new products to existing and new clients —advisers are still being blamed for the shortcomings of those in the “ivory towers”!!!!
Everything old is new! Refer Yours for Life [a history of the T&G] wherein it states in November 1893 the life insurance industry decreed the practice of “twisting” policies to be an act that would bring the industry into disrepute! Twisting was defined as “inducing a policyholder to lapse, surrender or make paid-up with 1 life office in order to effect another policy with a different life office, where the practice invariably resulted in a loss to the policyholder”. 118 years later, it’s now called churning! The life offices must really be worried about this so called practice; no doubt wanting to address this major issue within the next 118 years.
I agree with “Adviser”…..I don’t give a rats either and those who think this is just a commission driven exercise, have NO idea.
The big issue here is the time and cost to perform the prescriptive review process,forced on our industry… and who will fund it.
The facts are that the majority of clients do not have the disposal income to pay our hourly rate for a professional risk review and if they do, they don’t want to pay for it.
For over 150 years, our industry has provided advice for all clients including “pro bono” advice for prospects as well …all funded via the trails received by our business and new business commission.
The system has worked and still works well,like a cooperative and clients are in a better position because of our advice……and the business can grow.
To answer our critics….Granted we began as tied agents back then and some of the products were not the best, but we have pushed insurers to compete, product has evolved and if a change of insurer is PROVEN to be in the clients best interest…so be it..the new business commission supports the advice cooperative and everybody wins.
As Garry Crole said..”the term churning is slanderous” …What is a serial churner? How is it measured?….This is just another witch hunt
The FSC needs to back off our over regulated industry and create an EVEN playing field.They need to take a close look at the on line and over the telephone offers flooding the market that are causing….serious churning.
They need to push the Industry Funds/ISN to explain why they (1) can churn our risk clients into cover via their funds, with no advice, no research (2)have significant numbers of fund members being grossly under insured and (3) offer substandard covers to the masses,creating serious problems at claim time, knowing better cover is available.
Time for the various players to wake up and back off, before our industry becomes extinct and clients are forced to buy “accidental death cover” from a supermarket shelf.
I don’t disagree with comments made on this post, however if while looking after a client’s best interest you find a better policy within a given timeframe (say 3 years) why not make it even better for the client by rebating upfront commission when the new one is written. We’ve been paid in may cases a large amount of upfront for the firt policy, isn’t it an anomoly that while primarily looking after the clients best interest, the secondary benefit is another large upfront in many cases for the next policy within a relatively short timeframe. I thought the trail commission on the first polciy paid for this review?
I like Brett’s comment, He must work for a bank to say such rot. My Lawyer was instructed to respond to a letter, my bill should have been $75.00 yet I was charged $2,500.00. Go figure. A review can take several hours and can also take several appointments. Today for example I have a self employed builder he wants to cancel his insurance because he is going through a divorce, he earns $6,000.00 a month net, He said he can’t afford his income insurance. (5% of his income to protect his entire life style should he get sick or injured), I have spent 2 hours with this man and written 2 SOA’S not only that I have done research, quotes and claim stats. Today after 12 hours work(at $250 an hour that’s $3,000.00) he has decided he will have some cover in place, I’ve done my job and I am taking the full upfront commission I have earned it. I have staff to pay for Insurance etc, etc, etc those who are not self employed have no idea and cant afford to work as a self employed planner. My priority to offer my clients the best advice is to stay in business.
My practice is amongst the top 1% highest producers in the country I am proud of what I do, I have caused more than 130 Million dollars in payouts to be paid, Saved families from bankruptcy and despair, My job is the best in the world, I save peoples financial lives you cant put a price on that. Paying me $150,000.00 a year is nothing compared to that of some insurance companies salaries, Justify $15,000,000.00 a year or $3,000.00 an hour.
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