In one of the first public comments to be made by an individual life insurance company since the Financial Services Council (FSC) announced its new Insurance Framework, Zurich will shortly issue a statement to advisers outlining its position on insurance commissions and responsibility periods.
The insurer will tell advisers that commissions are crucial to ensuring the affordability of risk insurance, and fundamental to alleviating Australia’s underinsurance problem.
A preview of the statement has been provided to riskinfo, in which Zurich reiterates that it vigorously argued against the ban on life insurance commissions initially proposed under FoFA, and that commissions are crucial to ensuring risk advice is as affordable as possible, and available to as wide a range of consumers as possible.
In addition, Zurich says it does not support any framework that reduces the ability of advisers to choose the remuneration model that best suits their business.
… an adviser’s decision to operate on a fee for service basis should be driven by consumer demand
‘In this context we believe an adviser’s decision to operate on a fee for service basis should be driven by consumer demand and the preferences of that individual adviser, rather than being forced upon them either by legislative or other external means,’ Zurich states.
A spokesperson for Zurich said the group wanted to reassure advisers it would continue to be actively involved in discussions with the FSC.
“Zurich has already demonstrated its commitment to advisers by taking an active role in the Future of Financial Advice (FoFA) reforms debate, and other key regulatory issues which have emerged over the past 18 months. We will absolutely continue to work with the FSC to ensure advisers’ voices are heard on what is a significant issue for our industry,” the spokesperson said.
The insurer has previously framed what it called a ‘comprehensive response’ to the FSC’s initial proposal. As an alternative to the original recommendations by the Council, Zurich said its preferred approach was to deal individually with the very small number of advisers who abuse the system.
Zurich’s statement will note that the FSC’s latest announcement on insurance commissions and responsibility periods (see: FSC Backs Down on Churning Policy) is a proposal only, and will be subject to a lengthy consultation process:
‘Like the AFA, we believe such a process is crucial to arriving at an optimal outcome for advisers and consumers alike, and we look forward to seeing more details around the proposal as soon as they become available. As one of the last remaining independent insurers and longstanding partner of independent advisers, we welcome the opportunity to actively participate in this consultation process, which we see as fundamental to finding and agreeing an outcome sustainable for all stakeholders.’
Hmmm. On the one hand, the comment doesn’t really say anything except for highlighting what they did with FoFA – presumably to soften us up.
But the bit at the end, around their preferred method of dealing with it, is really encouraging. In the best case, this could be the first splinter away from the FSC coalition and could suggest a softening of the group’s stance.
Interesting.
If Zurich slays Brogden’s Ogre, I’ll blow the dust of there PDS and become there new best mate.
About time, the only independents left ZURICH-AIA-TAL-CLEARVIEW should break away from the FSC they(the fsc)have shown that just like the FOFA reforms they are only interested in a witchhunt blaming independent advisers for all the waes of the industry while pushing political agendas and blatent self intrest none of these reforms address the real challeges of providing affordable insurance and thereby adressing the massive underinsurance problem.deal with those doing the wrong thing and let the rest of us get on with business
Agree with planner. Lets not forget the real issue is not churning. This was seen by the banks & insurers as another way to increase their profits at the expense of the workers at the coalface. Churning is done by a small number. The insurance companies know who they are and STILL accept their business & pay full comms. WHY? increases bonuses. The real problem in this industry is the insurers and THEIR practices not a handful of advisers.
This is a breath of fresh air….. May be some sanity into an ever increasing madness!
Danny Ellis is correct the independents will break away and there will be an insurance revolution, this of course happened way back when Australian Eagle entered the market and told the big insurance companies that they would not honour the ‘twisting’ agreement. AE introduced unbundled contracts which blew the old Whole Life and Endowment Policies out of the water! No one in their right mind would recommend a policy with a 3 year responsibility just too much risk – 50% clawback in the third year extremely harsh!
Good on Zurich for coming out with something.
The silence from the Insurers was disconcerting and we hope more Companies state their points of view so the advisers know where we stand.
It would be nice if the FSC and the Insurers did more talking to Advisers and clients to see what they think,considering the reason for the debate is based on what advisers and clients do, so feedback and honest questions that are relevant, will pinpoint why premiums lapse.
Instead of paying a survey Company that has no experiance in Insurance, to ask inane, self serving questions that will not find the real cause, why not do something radical and ask expert Insurance advisers to come up with the questions to ask, as it benefits Insurers,advisers and clients if Business stays on the books.
I know why clients lapse policies and I know how to fix the problem.
Is there any Insurance Company, or is the FSC, willing to listen?
Funny thing. I don’t think the manufacturers through their boys club (FSC) understood the backlash that they were going to get. Just watch them all come out now one by one and say “oh it wasn’t us, we were not in favour of this all along”, or will we see a public statement from one who will put their hand up and say they are in favour. I think not as it is too easy to hide behind the FSC.
Agree with fed up and have posted previously that this was never about churning, was always about profit. The independent insurance companies that maintain a 12 month respondsibility for new business and level or hybrid terms for replacement/take-over terms will be successful on two levels:-
Firstly the IA will see this as support and understanding of our work, and
Secondly, a positive way to disincent the very small portion of advsers who may be deemed as ‘serial churners’ without penalising all advisers.
This will facilitate the IA doing their best work for their clients with clients being offered the best policies that their money can purchase.
This would be an appropriate outcome and the insurance companies that take this lead will of course receive a massive amount of support from the IA’s.
I’d like to congratulate Zurich on their common sense approach to this heated debate. This is a positive move for the HONEST advisers out there and one that should be applauded. Very beneficial to your cause I would think too Zurich!
Congrats Zurich.
Advisers are not recognised for what they do for their clients outside of selling.
If the FSC and the insurers guarantee to trawl the registry of births and deaths and then examine their own policy registers to be fair about people whose policies are noted as lapsed, but in fact had died, then maybe they will have some credibility. I and other advisers can tell you about a few of these cases where claims should have been paid.
If the FSC guarantees to visit the hospitals to try and find out if a policy that had lapsed and fallen off the books of insurers, should have possibly been paid to a seriously ill and disabled person, then maybe advisers will have been outlived.
It is the adviser who has been doing this job. The moment that they hear that one of their clients has died or fallen ill, or discover it when attempting to collect a premium, they are on to it.
Insurers would have a really crappy name if it wasn’t for the advisers saving their faces.
Isn’t it about time that the adviser is rewarded for this work rather than being strippoed of earnings because our parliamentarians don’t know what a financial crisis is ?
The reason that the insurance business has half a good name is because of the great unpaid work done by advisers.
Advisers should be paid for this work by the insurers over and above the commissions paid at the outset of the policies.
Clawing back commission is going to put the clients at great risk of losing these services.
There is another way. Look at the international market before destroying our livelihood here in Australia.
Some time ago I had a claim for a substantial sum insured, which the insurer paid, but because it was a month after the policy was accepted, my commission was clawed back, and I also lost the future renewal commissions.
Great service, Great Result ? I lost a packet but, still completed the claim forms for the client’s spouse and arranged their estate’s financial plan.
Great work FSC ! Backed by those insurers who stand to gain whichever way it goes.
JG
What other industry gets penalised for doing their job as well as you have with this case?
Clawback because of claims in the responsibility period is simply harsh and unfair!
The longer we are in the industry the more we get them, even more with a 3 year responsibility period.
When you complain to the insurance company their response is ‘it’s in your agreement with us!’
Check your providers – if they claw back commission for claims, I would be having some stern words. This isn’t the norm.
So Zurich’s comment so far addresses their view on old FoFA proposals (none of which were pursed) regarding risk commissions, but little on thier view surrounding the Replacement Business Framework proposed by the FSC.. I look forward to thier full response, but there is little here to indicate whether or not they support the FSC, rather they ‘prefer’ targeting specific churners.
At last an Insurance Company which has stood up to be counted on the whole issue of commissions! My congratulations to Zurich for their stand and making it clear what almost every advisor has always known..that commissions play a critical role in the distribution of Life Insurance in Australi and this will always be the case.
Thankyou Zurich.
I’ll be voting on this debate by placing business & supporting Zurich…. & those that have the balls to stand for common sense instead of self interest.
Its very clear that this debate (responsibility periods)is driven by profit and banks.
FoFa is a complete farce favouring banks and will leave so many without advice!
Good On You Zurich its a shame THE FPA’s John Bacon does not get of his pud and do something for a change Or any of those people who feed from our industry put them on a commission and see if they survive.
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