Advisers who fail to comply with the best interests duty when recommending a client switches their insurance policy will be the focus of regulatory action over the next 12 months, the Australian Securities and Investments Commission (ASIC) has confirmed.
Speaking at the FSC’s National Conference in Brisbane this week, ASIC’s Deputy Chairman, Peter Kell, confirmed the regulator would be undertaking a major, risk-based surveillance of life insurance advice during the 2013-14 financial year.
Mr Kell said the review will investigate whether advisers are acting in the best interests of their clients when advising them to switch life insurance policies. He said ASIC understood that, in many cases, switching occurred because there was a meaningfully better policy available, or because the client’s situation or objectives had changed.
… we will be focusing on areas where we see what looks to be straight-out ‘churn’
“But we will be focusing on areas where we see what looks to be straight-out ‘churn’ – that is, excessive switching between policies that doesn’t leave the client any better off, and that is motivated purely by the adviser’s financial interests,” the Deputy Chairman said.
“It goes without saying that the mis-selling of life insurance doesn’t help build trust, and inappropriate advice, and inappropriate switching – ‘insurance churn’ – undermines consumer confidence.”
Mr Kell said there were a number of reasons for undertaking the review, including the fact that the regulator viewed insurance advice as a very important area for consumers.
“The second is that we’ve publicly said for some time that we would be more likely to focus on life insurance advice in the absence of an industry framework. That’s yet to be put in place, so we are delivering on what we said we would do.
“The third reason is that we’ve seen some poor practices in some of our recent surveillances,” he said.
According to Mr Kell, there were numerous cases of inappropriate advice or mis-selling of life insurance, and that the practice was not limited to the occasional, individual rogue. “There are, in some firms, systemic problems,” he said.
In addition, the fact that retail advice is exempt from the ban on conflicted remuneration under the Future of Financial Advice (FoFA) reforms is also a key consideration for ASIC.
… we do not want to see a situation where some advisers may churn clients to replace other commissions
“What we do not want to see is a situation to arise whereby some advisers may churn clients to replace other commissions that are no longer permitted. This would help no-one, including the vast majority of reputable advisers,” Mr Kell explained.
In closing his presentation, Mr Kell said: “As part of this work, we’ll be talking with insurance companies, with advice firms, and industry groups, to understand how the industry is travelling, how the work that the industry itself is doing on life insurance is going, and what we can do to support that.
“We want to understand emerging issues about this industry – how products are being developed and distributed – and that includes an understanding both of how advisers are being remunerated but also an understanding of how direct channels are evolving.”
ASIC plans to release its report on insurance advice next year.
If ASIC are focussed on truly understanding the retail and direct Life Insurance Industry,that is a admirable thing.
However,in order to understand how a Industry works and why things happen, all participants,including the customers need to be part of the research, so a true picture can develop,not just a vested interest overview that benefits only that one entity,to the detriment of others.
The reality of the Life Industry is that the retail part of the equation is being cannibalised by direct, wholesale and Industry Super offerings that appear attractive but usually do not match in quality and whom can run rampant with little recourse or red tape and hoops, that unfortunately Advisers must leap through to compete.
Oh dear! The industry powers-that-be are targeting advisers to the detriment of the insurance buying public. These industry powers-that-be are making it so hard for advisers that before long they'll quit, and worse still newer advisers, full of life and energy will have their desire to make our industry their stronghold, dashed to pieces on the rocks of despair!
So the ASIC crew got up one morning and thought, well must be time to hit the risk advisers, after all none of them can be trusted. We might even try a bit of sneaky surveillance, try and catch a few of them out. Doesn't matter if there are only a small minority doing the wrong thing, we will stick them all in the same basket. So now we must work in a very tough environment under this mantra of fear and intimidation. You can't legislate for good advice and ehtical and honest behaviour. Unfortunately the small minority of bad apples are as usual causing the vast majority who are doing the right thing to suffer with a raft of new legislation and constant threats.
If only we were all perfect.
Direct marketing offers without advice or risk analysis, website quoting without advice or risk analysis, toll free over the phone quoting without advice or risk analysis, is causing more economic hardship, and underinsurance, and incorrect insurance policies, is causing more hardship to families and individuals than supposedly churning
.
ASIC seems to turn a blind eye to this BUT wants to have another crack at Insurance Advisers who assist people with needs and concerns.
Bull for those faceless assassins.
JPS
Comments are closed.