'Churning' defames advisers, says Synchron
The term 'churning', which is being used to describe a legitimate practice, defames advisers while it whitewashes the role of life companies, according to Synchron director Don Trapnell.
Trapnell said moving clients from one product to another was predicted and even facilitated by life companies, with their adviser solution offerings and simpler processes.
"Life companies are very happy to see and actively encourage business moving to them from their competitors, but cry foul and label the practice 'churning' when it moves in the opposite direction," Trapnell said.
"It is highly contentious at best, and a blanket defamation of financial advisers at worst, to label as 'churning' the legitimate process of moving a client from one life company or life insurance product to another, after discovering a better alternative for them," he said.
Trapnell also criticised the Financial Services Council (FSC) - which counts major life insurers as members - for jumping on what he calls "the anti-adviser bandwagon".
He believes the FSC is attempting to camouflage the essential role life insurance companies play in the process by "encouraging the use of the term 'churning' and laying the blame for it on advisers".
Trapnell pointed to claims made by life insurance companies that a one per cent increase in a company's lapse rate represents about a $5 million drop in profits.
"Rather than blaming advisers for this, the industry should consider the over-generous, unrealistic and unsustainable lapse rate assumptions made by actuaries when setting premium rates," Trapnell said.
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