Determining the extent of the churning problem will be difficult, the Australian Securities and Investments Commission (ASIC) has admitted.<\/p>\n
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Speaking to riskinfo this week, ASIC Senior Executive Leader, Investors and Financial Consumers, Joanna Bird<\/strong>, said that even with the support of life companies it would be difficult to generate hard data on how many advisers are churning.<\/p>\n … switching life insurance policies is not necessarily churn<\/p><\/blockquote>\n \u201cThe problem is that switching life insurance policies is not necessarily churn. There may well be very good reasons why an adviser would change a client\u2019s life insurance policy,\u201d Ms Bird said.<\/p>\n \u201cWe see churning as cancelling existing policies and applying for new policies to maximise the adviser\u2019s revenue, without delivering any real benefit to the client.<\/p>\n \u201cWe see that it causes real harm to clients, to consumers, and in those circumstances we want to take action against it.\u201d<\/p>\n In order to attempt to quantify the issue, Ms Bird confirmed that ASIC will undertake a project to investigate churning. The initial stage of the project, will involve the collection of data from life insurers, as well as the surveillance of advice businesses.<\/p>\n \u201cWe\u2019ve done a lot of licensing action recently (license cancellation, imposed conditions), and some of those have involved churn.<\/p>\n \u201cChurn is an example of inappropriate advice, so we would treat it like we treat other forms of inappropriate advice.\u201d<\/p>\n Ms Bird said the timing of ASIC\u2019s interest in the issue was in part due to impending Future of Financial Advice (FoFA) reforms.<\/p>\n … we see it regularly enough to be concerned about it<\/p><\/blockquote>\n \u201cIt\u2019s a problem, and we see it regularly enough to be concerned about it, especially in circumstances where we have reason to believe that changes to the regulatory regime may make it more prevalent going forward\u2026 Commissions will still exist in relation to life insurance, so there might be an even stronger incentive to churn, in order to get commission for life insurance products, once the implementation of FoFA has gone through.\u201d<\/p>\n