{"id":11751,"date":"2011-08-04T13:09:39","date_gmt":"2011-08-04T03:09:39","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=11751"},"modified":"2021-08-03T12:24:58","modified_gmt":"2021-08-03T02:24:58","slug":"fsc-announces-move-to-address-churning","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2011\/08\/04\/fsc-announces-move-to-address-churning\/","title":{"rendered":"FSC Announces Move to Address Churning"},"content":{"rendered":"

The Financial Services Council<\/a> (FSC) has proposed\u00a0new reform measures designed to manage the issue of\u00a0churning insurance policies.<\/p>\n

The ‘Standard for Replacement Business’ initiative was announced by CEO John Brogden<\/strong> on the second day of\u00a0 the FSC National Conference.<\/p>\n

Under the proposed reform, riskinfo understands the FSC is recommending:<\/p>\n

    \n
  1. The\u00a0removal of\u00a0takeover terms for policies transferred by an adviser between insurers<\/li>\n
  2. The establishment of\u00a0a two year adviser responsibility period where\u00a0100% of commission would be clawed-back if the policy lapses or is cancelled within one year, and 50% clawed-back in the second year<\/li>\n<\/ol>\n

    Mr Brogden said the time had come to address the practice of churn in order to support financial advisers and a sustainable life insurance industry in Australia.<\/p>\n

    “This practice is not in the interests of consumers and the FSC has taken the clear view that it is inconsistent with the statutory requirement for financial advisers to act in their clients’ best interests.<\/p>\n

    “While this practice is not widespread, it is significant enough an issue to warrant industry action,” he said.<\/p>\n

    The insurance industry has been quick to offer its qualified support for this\u00a0initiative.\u00a0 Asteron’s Executive General Manager, Jordan Hawke<\/strong>, commended the FSC for taking a proactive approach to the issue of\u00a0churning, in particular the removal of takeover terms:<\/p>\n

    “We believe appropriate risk management is required at underwriting to ensure we protect the integrity of advisers’ books of business and their clients’ cover, so that premiums remain affordable, and that we can deliver on our commitment to pay claims,” he said.<\/p>\n

    But Mr Hawke noted that not all replacement business is churn:\u00a0 “With products and client situations constantly changing, it is appropriate for advisers to review their clients’ insurance portfolio to ensure that it is both appropriate and competitive. It is all about quality advice,” said Mr Hawke, adding:<\/p>\n

    riskinfo understands the proposed two-year responsibility period would address the larger than average number of policies that are cancelled and re-issued at thirteen months (most policy responsibility, or ‘clawback’\u00a0periods cease after\u00a0twelve months).\u00a0 Mr Hawke\u00a0noted\u00a0that insurance policies usually don’t change sufficiently in a twelve-month period to justify their cancellation and\u00a0re-issue.<\/p>\n

    But while welcoming the two-year responsibility period\u00a0proposal as an\u00a0 important first step, Mr Hawke added Asteron’s\u00a0own experience “… shows that policy cancellations due to adviser recommendation combined with\u00a0rising cost pressures and lack of affordability for\u00a0clients, occurs mostly between 3 and 7 years.”<\/p>\n

    This new, ‘self-regulated’\u00a0Standard on churning is currently being developed by the FSC\u00a0in consultation with\u00a0industry stakeholders, government and regulators.\u00a0 The FSC says it aims to have the Standard finalised in 2012 with an implementation date consistent with the commencement of FoFA reforms.<\/p>\n","protected":false},"excerpt":{"rendered":"

    The Financial Services Council (FSC) has proposed\u00a0new reform measures designed to manage the issue of\u00a0churning insurance policies.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[282,8],"tags":[],"class_list":{"0":"post-11751","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-associations","7":"category-compliance-regulation","8":"headers-new"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/11751","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=11751"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/11751\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=11751"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=11751"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=11751"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}