Risk advisers have begun renewing their appeals to a key Parliamentary Committee to reconsider the implications of the Life Insurance Framework (LIF) and the Government’s underlying legislation, arguing that it fails to clearly define what constitutes real “churn”.
New submissions to the Parliamentary Joint Committee on Corporations and Financial Services Review of the Life Insurance industry have urged members of the committee to ensure they have a better understanding of churn.
The submissions have coincided with answers to questions on notice from committee members from the Australian Securities and Investments Commission (ASIC) within which the regulator stated that “churn” is not a breach of the law and may well be in the client’s best interests.
In the most recent submission filed with the committee, Certified Financial Planner (CFP) and Pathway Financial Solutions principal, Greg Newton said that before both sides of parliament changed the operating landscape so dramatically, he believed it would be wise for them to “quantify how much ‘churn’ there actually is in the industry”.
And he said that by “churn”, he did not mean policies that were simply cancelled by clients, hit an insurer-imposed expiry age, or ceased upon the payment of a life, total and permanent disability (TPD) or trauma claim or “many of the other triggers that insurers use to throw into the box of ‘policy cancellation'”.
“In many cases the reporting systems used by insurers simply don’t differentiate between a policy that is ‘cancelled’ under any of the above scenarios versus a policy that is replaced by a new policy written with a different insurer. And unfortunately, it is these flawed statistics that are being used as a catalyst for this legislation,” Newton said.
Another risk adviser, Nick Arkoudis used his recently-filed submission to also argue for committee members to insist on better data around the existence of churn.
“Factual data has proven that the issue with ‘adviser churn’ is incorrect,” he said, warning that “with these reforms, I will have no options but to downsize, let go of contractors and potentially wind down my business”.
The Parliamentary Committee is due to report on 30 June.
