{"id":14890,"date":"2012-03-22T09:17:37","date_gmt":"2012-03-21T23:17:37","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=14890"},"modified":"2012-03-22T09:54:32","modified_gmt":"2012-03-21T23:54:32","slug":"fsc-churning-announcement-5-year-upfront-commission-restriction","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2012\/03\/22\/fsc-churning-announcement-5-year-upfront-commission-restriction\/","title":{"rendered":"FSC Churning Announcement &#8211; 5-Year Upfront Commission Restriction"},"content":{"rendered":"<p>In its latest move\u00a0to address churning, the Financial Services Council (FSC) has proposed a restriction on upfront commissions payable on replacement business.<\/p>\n<p><!--more-->Announced by <strong>Pauline Blight-Johnston<\/strong>, Managing Director of RGA Reinsurance, at the commencement of today&#8217;s 2012 FSC Life Insurance Conference, the proposal will be\u00a0the subject of\u00a0a three-month industry consultation period, commencing today.<\/p>\n<p>The\u00a0policy\u00a0states that advisers moving existing clients from one insurer to another within a five-year period will only be eligible for level commission.\u00a0 The policy is intended to\u00a0ensure that upfront commission is only paid once\u00a0during this period.<\/p>\n<h6>Practices that are not in the best interest of clients are not in the best interest of the industry<\/h6>\n<p>&#8220;Practices that are not in the best interest of clients are not in the best interest of the industry,&#8221; Ms Blight-Johnston said. &#8220;Churn is one such practice.&#8221;<\/p>\n<p>Accompanying today&#8217;s announcement, the FSC has issued a classification of churning, which it defines as:<\/p>\n<p><em>&#8216;Replacement business which occurs where an adviser makes arrangements for a client to replace an existing individual life, lump sum benefit or income protection policy with a new policy of the same kind within five years from the commencement date of the original policy.&#8217;<\/em><\/p>\n<p>This latest proposal builds on measures announced by the Council in August 2011.\u00a0\u00a0The FSC&#8217;s\u00a0 key churning policy components are:<\/p>\n<ul>\n<li>The restriction on\u00a0remuneration for replacement business, where\u00a0only level commission will be available to the adviser from the insurer<\/li>\n<li>The removal of takeover terms for a policy or group of policies that are transferred by an adviser between insurers<\/li>\n<li>The establishment of a consistent adviser responsibility period across the industry of two years, with 100% commission clawback if the policy lapses with an insurer within one year, and 50% commission clawback if the policy lapses with an insurer during the second year<\/li>\n<\/ul>\n<p>The intention of the three-month consultation period is to generate an opportunity for broad-based industry discussion on all elements of the FSC&#8217;s churning policy.\u00a0 The FSC has targeted 1 July 2013 as the implementation date for its churning framework, to coincide with the commencement of the Future of Financial Advice reform measures.<\/p>\n<p>&#8220;We recognise that only a small proportion of financial advisers churn life insurance policies, however we believe it is a serious issue which is significant enough to warrant industry action,&#8221; said <strong>John Brogden<\/strong>, FSC CEO.<\/p>\n<p>&#8220;Addressing the practice of churn is in the interest of consumers, supports financial advice as a profession and facilitates a sustainable life insurance industry in Australia.&#8221;<\/p>\n<p>Mr Brogden added that a key element of the policy was that it does not prevent advisers from being remunerated for replacing business.<\/p>\n<p>&#8220;These measures are not intended to limit or prohibit alternative payment structures that may exist for retail life insurance advice including fee-for-service models,&#8221; he said.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In its latest move\u00a0to address churning, the Financial Services Council (FSC) has proposed a restriction on upfront commissions payable on replacement business.<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[282,259,241,270],"tags":[],"class_list":{"0":"post-14890","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-associations","7":"category-breaking","8":"category-conferences-and-events","9":"category-remuneration"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/14890","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\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=14890"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/14890\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=14890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=14890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=14890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}