{"id":52717,"date":"2020-10-23T09:41:40","date_gmt":"2020-10-22T23:41:40","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=52717"},"modified":"2020-10-27T14:40:43","modified_gmt":"2020-10-27T04:40:43","slug":"quality-and-context-the-challenge-for-asic","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2020\/10\/23\/quality-and-context-the-challenge-for-asic\/","title":{"rendered":"Quality and Context \u2013 the Challenge for ASIC"},"content":{"rendered":"\n
\n
\n

Riskinfo considers the methodology that ASIC will be using to determine the quality of life insurance advice in 2021. We ask how this outcome will be compared with the past, which may be critical in determining the future of life insurance advice in Australia…<\/h3>\n<\/div>\n<\/div>\n

<\/p>\n

At last week\u2019s AFA Vision 2020 Virtual Conference, ASIC\u2019s Senior Executive Leader, Financial Advisers, Kate Metz<\/strong>, outlined the methodology the regulator will be employing when conducting its review of the impact of the Life Insurance Framework remuneration reforms.<\/p>\n

During a Regulator\u2019s panel discussion, Metz told the virtual conference audience that ASIC is undertaking two pieces of work in relation to the 2021 ASIC Review of the quality of life insurance advice. Noting these two pieces of work are connected, she said they will comprise:<\/p>\n

    \n
  1. A review of the quality of life insurance advice in 2017 in the lead-up to the start of the three-year LIF transition period on 1 January 2018.<\/li>\n
  2. A further review of the quality of advice based on advice delivered in 2021, post the full implementation of the LIF remuneration reforms.<\/li>\n<\/ol>\n

    Metz said the purpose of the two reviews is to determine whether there has been improvement over the two periods of time, ie between 2017 and 2021.<\/p>\n

    We are not targeting poor advice. It is completely random…<\/p><\/blockquote>\n

    She added that the methodology ASIC would employ is the same for both sets of reviews, namely that the regulator will be reviewing a random and representative sample of advice: \u201cWe are not targeting poor advice. It is completely random,\u201d she said.<\/p>\n

    Metz added that ASIC has started work on the review of 2017 advice and notices have now been served on about 130 licensees, calling for 2017 advice files. In most cases, Metz says ASIC has requested only one or two files from licensees, but in some cases, more files from larger licensees.<\/p>\n

    Compare and contrast<\/strong><\/p>\n

    This methodology for collection of the data which will inform the 2017 and 2021 advice reviews appears logical and fair. It reflects the stronger engagement that now appears to exist between the regulator and key industry stakeholders. But it\u2019s difficult not to contrast this more open approach with that taken by ASIC when collecting data which shaped the findings contained in its Report 413 Review of retail life insurance advice<\/a>.<\/p>\n

    In stark contrast to that intended for the 2017 and 2021 advice quality reviews, ASIC took an almost opposite approach in framing Report 413, which was released in October 2014, based on advice files dating back to 2012 and 2013. In the methodology notes accompanying Report 413, ASIC\u2019s approach was revealed as far from random. The regulator said it employed:<\/p>\n

    \u201c\u2026a targeted surveillance in so far as the sample of files selected for review was not a random sample of advice from randomly selected AFS licensees or authorised representatives. Rather, our objective was to identify the licensees and authorised representatives who were active in giving life insurance advice so as to test the quality of advice these licensees were giving.<\/em>\u201d<\/p>\n

    There\u2019s also a second key difference in methodology this time around, which relates to the number of licensees selected for review of their advice files.<\/p>\n

    In 2014, ASIC notes it asked the retail life companies to provide details of the three licensees or authorised representatives who had:<\/p>\n