Synchron Director Don Trapnell has continued to voice his opposition to the Financial Services Council’s (FSC) proposed measures to address churning, labelling a uniform responsibility period ‘anti-competitive’.
The FSC’s Insurance Framework proposes a three year responsibility period, with a commission claw-back provision to apply as follows:
- 100% of commission in the first year
- 75% in the second year
- 50% in the third year
According to Mr Trapnell, the policy is anti-competitive, and as a result does not have the support of the Synchron group.
…competitive forces should drive adviser remuneration models
He argued that competitive forces should drive adviser remuneration models, citing past changes to responsibility periods made by the industry.
“In the 1970s, advisers had a three-year responsibility period; by the 1980s, due to competitive pressures, this moved to a two-year responsibility. By mid-1980, again as a result of competitive pressures, this moved to a one-year period. These changes were the result of a competitive market at work,” he said.
Mr Trapnell has previously indicated Synchron would consider making a complaint to the Australian Competition and Consumer Commission (ACCC) about the policy, if it were adopted by insurers.
“Life companies will only gain the respect of Synchron when they adopt processes which are designed to prevent churned cases coming towards them as opposed to penalising advisers for lapsed cases going away from them,” he said.
I wonder if the reinsurers are going to apply a 3 year callback on the insurance companies? Is that quiet I hear?I am aware of potential new competitors looking forward to what will be the FSC’s mistake and plenty of advisers who will happily work with them! Apply your 3 year callback on all advisers not just the churners, regardless of the circumstances at your own pearl! Good on you Don and shame on you advisers prepared to just take it!
Definitely agree with Don’s comments. It appears to be driven by insurers who may have colluded to have this draconian measure tabled.
I can’t think of a single reason more likely to raise the level of underinsurance in this country. This beastly move is guaranteed to drive older advisers particularly from the life-risk industry. Oh dear, what are they thinking…
Until all Insurance Companies fully understand why policies lapse, then it is premature to make judgement calls that will have a negative impact and still not fix the problem.
Churning is one reason policies lapse and serial churners who frequently swap clients policies for their own financial gain, should be drummed out of the industry.
However, the reasons why policies lapse are varied and the vast majority of policies that lapse, have nothing to do with the adviser, though it appears to be lumped in as churning.
Just some of the circumstances that cause clients to cancel or reduce their policies are; stepped premium increases that are excessive in the clients eyes. Change of job or loss of job.Business downturn for self employed clients,family separation, inheritance, online and over the phone competitors offering cheaper policies,
Industry superannuation and Group Life offerings, confusing information from the Life Insurance Companies,etc;
A simple solution to determine why policies are lapsing, is before a policy cancellation can proceed, all Insurance Companies send to the clients a standard form that finds out the reasons for the cancellation.
Then instead of guessing as to why policies lapse,including churning,we can determine the exact cause and make decisions on the future of our Industry based on fact.
I agree totally with you Don. The FSC want to blame all advisers and take no responsibility. Insurers are the ones who must stop taking new business from the serial churners. They know who they are, yet do not want to take the responsibility. It is all about meeting budgets for new business. Advisers should stop supporting Insurers who support the churners. May I suggest a register of those companies be made available. I am sure they would then cease to support serial churners when the new business ceased.
Comments are closed.