![\"\"](\"https:\/\/riskinfo.com.au\/news\/files\/2013\/10\/Claire-Wivell-Plater-2.jpg\")
<\/a>Claire Wivell Plater<\/strong>, Managing Director of The Fold Legal, said just because an adviser uses hybrid or level commissions, instead of upfront commissions, does not mean the churning issue ceases to exist.<\/p>\n \u201cIf an adviser takes over a client from another adviser, the best they could get if they continue an existing policy would be a small trail commission,\u201d she said. \u201cSo hybrid and even level commissions can still incentivise advisers to churn, although obviously, to a lesser extent than full upfront commissions.\u201d<\/p>\n Ms Wivell Plater said she believed the current insurance review being undertaken by the Australian Securities and Investments Commission (ASIC) was the regulator\u2019s way of sending a message to the advice industry that commissions were driving inappropriate insurance switching.<\/p>\n \u201cIt is pretty clear that ASIC would have liked to see life insurance commissions banned as part of the Future of Financial Advice reforms,\u201d Ms Wivell Plater said. \u201cBecause they weren\u2019t, ASIC has to find other ways of rectifying the high levels of churning its shadow shopping uncovered.\u201d<\/p>\n It is pretty clear that ASIC would have liked to see life insurance commissions banned<\/p><\/blockquote>\n She warned \u2018churners\u2019 there would be nowhere to hide, as ASIC would be conducting specific investigations into advisers whose clients were regularly upgraded, using data it is currently obtaining from life companies.<\/p>\n \u201cASIC will be looking at the typical longevity of policies and how often they are \u2018upgraded\u2019. This will provide a pretty targeted indicator of which advisers are engaging in inappropriate switching.<\/p>\n \u201cSome of these advisers may believe they are honestly doing the right thing for their clients and in some cases, they may be. But that\u2019s a judgment call that ASIC will now make.\u201d<\/p>\n In order to demonstrate the appropriateness of their advice, Ms Wivell Plater said advisers should develop a \u2018Product Replacement Policy\u2019 which clearly explains the circumstances in which they can recommend how existing insurance products can be replaced.<\/p>\n She also warned against relying on system-produced product comparisons, citing ASIC\u2019s March 2012 shadow shopping study as a guide to the way ASIC will view switching recommendations: \u201cThe study found that nearly half of the switching recommendations inadequately provided the required information about the recommendation to change.<\/p>\n \u201cThe common industry practice of incorporating system-produced product comparisons, with little else, is not adequate,\u201d she said.<\/p>\n The regulator recently confirmed it had served notice to Australia\u2019s life insurers, requiring them to provide data for a project relating to inappropriate insurance switching (see: ASIC Commences Churn Inquiry<\/a>).<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Mandating hybrid or level commissions for insurance advice will not remove the practice of churn, according to an industry legal professional.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,270],"tags":[],"class_list":["post-23387","post","type-post","status-publish","format-standard","category-compliance-regulation","category-remuneration","headers-new"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/23387","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=23387"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/23387\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=23387"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=23387"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=23387"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}