Life companies should take the lead in stamping out churning, and not penalise the majority of advisers for the sins of a few. This has been the strong and consistent message from advisers over the last week, where the call to ban serial churners has again generated significant support as a solution to this question.
Given a range of solutions designed to address churning, 49% of advisers who voted in our latest poll supported the banning of serial churners. Other well-supported solutions included:
- Removal of takeover terms on replacement business (18%)
- Incentives for advisers to maintain low lapse ratios (17%)
- Banning upfront commission on replacement business(16%)
- Offering more attractive terms to advisers to upgrade existing policies (16%)
While advisers have put forward these suggested solutions in response to the FSC’s New Life Insurance Framework, many have also expressed their frustration that individual life companies are not doing more to make a stand against inappropriate replacement business. A selection of adviser comments we have received include:
… introduce a “yellow” card system
Identify the churners, introduce a “yellow” card system, so they are warned, and then refuse to accept business for a period of time…
Why don’t all insurers(through the FSC) get together and agree not to accept replacement business if less than three years since date of assurance…
For years Insurers have been setting their BDM quotas to such levels they exceed market capacity. Takeover terms straight out promote replacement and churn is viewed as happening with policies going “away” yet ignored on policies “coming in”…
The companies do have the information to know the professional churners and weed them out…
If the Life Offices would take a stance against those they know who are offending, the problem would be solved…
The insurers know who the churners are and they could do something to stop them by not accepting their business…
The insurance companies BDM’s know who the serial churners are. The answer is to NOT accept any new business from these people, put them and their company on a black list…
We have re-set this adviser poll today, in order for you to select multiple solutions from the list suggested by advisers (our apologies to those who initially voted in the poll last week, where we had not switched on the multiple answer format).
In this often emotive debate we are asking you to add your vote and make your voice heard…
How about the idea that Claw Back or Responsibility Periods are based upon whether Upfront, Hybrid or Level is selected. TAL years ago had 2 levels of Upfront that worked in line with the responibility period. The Life Companies could fix this issue in 5 seconds if they tried.
How many insuers have sponsored specific advisers (based on their production) for overseas conferences, etc, etc knowing the new business introduced was from churn.
On the one hand the insurer is rewarding the serial churner, and on the other hand complaining about loss of business through churning. Come on, get serious so our profession can be taken seriously.
Perhaps the reason that the Insurers will not ban the serial churners is that they know that if they were to do so, an Adviser may very well choose to take legal action against them for damages both now and into the future for Restraint of Trade.
The ACCC who administer the Competition and Consumers Act 2010 (formely Trade Practices Act) may be very interested in any Insurance company that elects to ban, or name and shame any adviser who is after all conducting his or her business legally and within the current guidelines set down by the Insurers.
Churning whilst morally wrong is not illegal, and the Insurers may be on very shaky ground should they elect to damage the reputation or business of any such serial Churner.
The following words come from a Restraint of Trade case many years ago.
“it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion.”
I have NO issues in reference to “stomping” out churners. What I am perplexed about, is the fact that due to the competiveness of the Life Insurance Industry, past & present. Life Companies are continously reviewing, revamping and structurally changing their products to make them more competitve & price effective to entice the consumer to buy, via thier ADVISER.
Therefore, am I guilty of being a “churner” if I have my client’s best interest at heart in offering the best product & pricing for that client’s needs.
Is it my fault that the Life Company gives me the choice of an Upfront Commission to accept on replacement business, and that they are willing to offer terms for TAKEOVER to “procure” the business to their company. I am only the “Medium” chanelling on their, (Life Companies) behalf. Instead of castigating the ADVISER, look at the source.
As a life Risk Specialist for over 27 years,I have never been guilty of “churning” a policy for the sake of “churning” to obtain a commission, yet I will say that I will happily “advise” (The Key Word), a client, if they do not have the best policy, terms & pricing for their cover required for their needs. It is my “Duty Of Care” as that client’s Adviser to offer the best possible policy & Terms for their “Needs”. I am required to be diligent and assist in reviewing MY client’s policy(s) and needs at least on an annual or 18 month basis. Again I am required to research and find the best possible product,terms, pricing for my client on this review to insure they have the “best” on OFFER. If I DO NOT, I am perecieved as being negligent in MY DUTY OF CARE to that client & can be accountable for my actions.
Again, if I do not provide or offer the BEST Product & pricing to my client, I leave the door open, for another Adviser to say exactly that. Your current Adviser is NOT looking after your best interests.
Therefore should I be guilty of being classified as a CHURNER or be negligent in MY DUTY OF CARE!
WHO REALLY IS TO BLAME HERE?
Arnold and Confused, great comments and it gets to the heart of the matter, Duty of Care and, if an insurer “names a churner” then they may be liable for legal action against them?
To be honest i feel we should move on, no matter what the outcome is, there will always be an insurance company to offer “more favourable” terms, they will be the one who gets the business (commerciality rules).
Very weary of the argument, which has no moved on from FOFA, Fees etc, what will be next?????
Why not also issue “yellow cards” to life companies and BDM’s who set targets knowing full well that these targets can only be achieved via churining. Why not issue yellow cards to life company executives and BDM’s who receive fat bonuses as a result of these targets, knowing full well that these targets are only possible due to churning – once again the buck seems to stop with the adviser – go to the source of the problem, the life companies and their policies!
Would be nice to hear from at least one Insurance company supporting their loyal advisers in all this.
Their silence says it all.
The only person I have seen support us advisers thus far is Don Trapnell from Syncron. If anyone out there is thinking of changing dealer groups you could do a lot worse than have a person like that on your team. I have my own license by the way so I am not pushing Syncron for any reason other than no one else seems to give a f— about us advisers.
So long as everyone in the sales management chain at any Life Company is paid purely on New Business and there is no reward for Low Lapse rates or persistency, churning will occurr. Offer some sort of reward everyone in the sales role Adviser BDM, State Manager etc. for Low Lapse rate – High Persistency and Hey Presto! Churning will be reduced.
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