The Australian Securities and Investments Commission (ASIC) has admitted that "churn" is not a breach of the law and may well be in the client's best interests.
Asking a question on notice from a Parliamentary Committee, ASIC revealed that it was receiving data from life insurance companies about churn by financial advisers that would enable it to monitor overall levels of churn in the life insurance advice industry.
However the regulator cautioned that "churn is not in itself a breach of the law because it may well be in the client's best interests to change life insurance policies".
ASIC said that, "therefore, data on churn is not a direct indicator of the level of compliance in the life insurance advice industry'.
It said that, at this point, ASIC was primarily using the data to identify advisers who might be providing non-compliant advice and should be subject to surveillance.
"Finally, we note as part of the Government's reforms to the remuneration arrangements in the life insurance advice industry, we will be conducting a review on the success of the reforms in 2021," ASIC said.
"In order to inform the review, we will collect data from life insurers periodically over the next few years. We have worked with APRA and industry to ensure we collect good quality, consistent, and useful data."