FSC acted in haste on churn: LICG
A group of risk advisers has once again levelled attacks against the Financial Services Council (FSC), noting the FSC wants the corporate regulator to justify the life insurance framework (LIF) by establishing the churn issue in hindsight after LIF reforms are introduced in 2018.
The Life Insurance Customer Group (LICG) has accused the FSC of adopting a "shoot first, ask questions later" tenet in advocating for LIF, stating that the FSC did not consider any factors other than the so-called ‘churn' issue when designing reforms.
Reiterating its accusation that the FSC did not provide any evidence or data on which to base the churn issue, the LICG also said the FSC did not consider quality of advice on any other factor, industry sustainability or the systemic poor institutional culture issue that has repeatedly been raised by the Australian Securities and Investments Commission (ASIC) and the media.
"Is it possible that the FSC has used ASIC to manufacture a justification to blame 23,300 advisers for an unproven issue so as to deflect attention from insurers' behaviours that are proven to be so detrimental to consumers?" the group asked.
The reforms were based on ASIC's findings of compliance issues found in 37 per cent of 79 targeted advisers, it added.
It also asked how the FSC managed to push reform through without clarifying how a decline in adviser remuneration could result in a consumer benefit that only insurers could provide, when there were no obligations on insurers to do anything in LIF.
"Worse, in their proposed ‘LIF reforms', members of the FSC seek to reduce adviser remuneration to a point where, unless the client's premium is more than $5,000 per annum, it will not even recover adviser costs," it said.
"We had initially thought this looks a lot like ‘shoot first, ask questions later', but now it would appear that it is just "shoot first". There will be no questions."
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