{"id":34262,"date":"2016-08-23T16:14:12","date_gmt":"2016-08-23T06:14:12","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=34262"},"modified":"2026-08-12T14:49:10","modified_gmt":"2026-08-12T04:49:10","slug":"adviser-churn-numbers-based-on-poor-insurer-data","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2016\/08\/23\/adviser-churn-numbers-based-on-poor-insurer-data\/","title":{"rendered":"Adviser Churn Numbers Based on Poor Insurer Data"},"content":{"rendered":"

Adviser related churn is likely to be as low as one to two percent of the total lapse rates of life insurance policies with the remainder of lapses included under areas such as policy expirations, cancellations, claims and internal replacement business.<\/p>\n

\"Rate<\/a>
Rate Detective CEO, Damon Rasheed<\/figcaption><\/figure>\n

Even in those cases where churn has been initiated by an adviser, there is a lack of information about whether this is in the best interest of clients, according to Damon Rasheed<\/strong>, Chief Executive of life insurance comparison site Rate Detective<\/a>, who believes churn numbers have been artificially inflated in the consideration by regulators and government.<\/p>\n

Rasheed, who was formerly an economist with the Australian Competition and Consumer Commission (ACCC), analysed lapse rates based on requests for information from retail life insurance companies. Across the 10 that responded there were significant differences in what is considered as a lapse. He also found no information about the percentage of lapses triggered by advisers churning clients.<\/p>\n

He said it as was a myth that all lapses are counted equally and \u201c\u2026these differences are creating distortions on reported lapse rates which are having the effect of artificially inflating them\u201d.<\/p>\n

Rasheed stated that while the responding life insurance companies all counted cancellations and premium dishonors leading to a cancellation as a lapse, two life insurance companies also included expired policies and two counted claims in their lapse figures.<\/p>\n

Policies cancelled from inception were also counted as a lapse by around half of the insurers who responded, according to Rasheed, who stated it was difficult to get precise data in this area due to the differing way in which lapse rates formulas are constructed.<\/p>\n

“…it\u2019s difficult to conclude that adviser driven churn makes up a substantial percentage of the annual lapse rate…”<\/h6>\n

\u201cThere is no data set that exists that we are aware of that determines what percentage of this is retail replacement cover from advisers churning their own clients. It\u2019s even difficult to take educated guesses,\u201d Rasheed said, claiming that large scale adviser churn was also a myth.<\/p>\n

\u201cWe know that cancellations without replacement, clients going to another adviser, expired policies, sum insured decreases, cancellations from inception, internal replacement business, book transfers, clients asking their advisers for new policies and reinstatements all must fit into this 15% lapse rate along with adviser driven churn,\u201d he added.<\/p>\n

\u201cGiven the above, it\u2019s difficult to conclude that adviser driven churn makes up a substantial percentage of the annual lapse rate and is unlikely to be the issue regulators perceive it to be. It\u2019s difficult seeing adviser driven churn making up more than one or two per cent of the overall lapse rate.\u201d Rasheed said.<\/p>\n

Rasheed also labelled the idea that any form of adviser related churn as negative was another myth that had arisen in recent years, and regulators should measure churn that is within the best interest of clients as a benchmark in addition to whether the related advice complied with financial service law.<\/p>\n

\u201cAdviser driven churn should be encouraged if the result is the customer is better off afterwards.”<\/h6>\n

\u201cAdviser driven churn should be encouraged if the result is the customer is better off afterwards. This is the normal competitive process working. In fact, advisers have a fiduciary duty to act in the client\u2019s best interest. As far as I am aware, there has been no industry report to determine whether churn has failed the best interest tests.\u201d Rasheed said.<\/p>\n

He stated that churn could be an indication of healthy competition in the market. In fact, in other industries, such as telecommunications, the ACCC has gone as far as taking action against companies that are seen to frustrate customer churn.<\/p>\n

\u201cAny regulation should keep the long term competitive dynamics of the industry in mind. The ASIC and Trowbridge reports are totally silent on this issue and it\u2019s definitely a topic that needs some consideration with the experts being the ACCC,\u201d Rasheed said.<\/p>\n

\u201cClearly a reduction in the adviser distribution network would have a negative impact on those product providers without bricks and mortar distribution, effectively reducing competition in the industry.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Adviser related churn is likely to be as low as one to two percent of the total lapse rates of life insurance policies with the remainder of lapses included under areas such as policy expirations, cancellations, claims and internal replacement business.<\/p>\n","protected":false},"author":3,"featured_media":34325,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,270,5],"tags":[4247],"class_list":["post-34262","post","type-post","status-publish","format-standard","has-post-thumbnail","category-products","category-remuneration","category-services","tag-feature","headers-new"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/34262","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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=34262"}],"version-history":[{"count":1,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/34262\/revisions"}],"predecessor-version":[{"id":83529,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/34262\/revisions\/83529"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/34325"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=34262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=34262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=34262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}