Financial Services Council (FSC) chief executive John Brogden has called upon the life insurance industry once again to heed the regulator's warning on churn action and self-regulate while it can.
Brogden used his opening statement at the FSC Life Insurance Conference this morning – read by the Council’s director of policy and international markets, Martin Codina – to express disappointment with the FSC’s churn framework not going ahead, reminding the industry of the events which triggered industry action.
"I have noted in the past that the catalyst for industry action to address 'churning' was a media release issued by [the] Minister [for Financial Services and Superannuation Bill] Shorten in 2011," Brogden said.
The press release stated:
"High upfront commissions have the potential to increase churn¬The Government will work with industry and consumer groups on the most effective way of implementing this reform."
Brogden also pointed to comments released by the Minister's office yesterday, stating Shorten expected the industry to follow through on its commitment to develop a workable solution with respect to life insurance policy churning.
"Industries should always take the opportunity to self-regulate when it arises," Brogden said. "Where an industry fails to self-regulate, the government regulator is always in the wings.
"Regardless of whether there is new legislation, ASIC will use the powers it already has to address churning," Brogden added.
At a recent Money Management/FSC breakfast function, ASIC Commissioner Peter Kell told the industry the regulator would not give up on this issue.
"If you don't think financial advice on life insurance is a problem area for ASIC and the industry, please think again," Kell said.
He listed four major problems with advice on life insurance that have been identified by ASIC, including replacing a client's policy regularly with little or no demonstration of the reasons why; replacing existing policies with more expensive ones; and examples of advisers falsifying client information when assisting them to change policies.
"ASIC has determined that these practices arise as a result of remuneration structures and inadequate compliance," Brogden said. "My message to you today is to heed this warning."
The sustainability of the industry is central to the affordability and accessibility of insurance, which is the major focus of this year's conference, Brogden said.
As part of the conference, the FSC also held its first Annual Life Insurance Awards Dinner last night, which recognised outstanding individuals within the life insurance industry as well as the efforts made by life companies to innovate and engage consumers.
Maria Crocker from ANZ Wealth won the Young Achiever Award, while BT Life's Phil Hay received the industry pioneer award.
Macquarie Life was also recognised for excellence in consumer innovation for its Active and Active Body products.
