Tough ASIC report on churn expected
Life/risk advisers and their licensees are bracing for tough analysis from the Australian Securities and Investments Commission (ASIC) when it releases a report traversing the issues of churn and lapse rates resulting from a close examination of the industry over the past eight months.
Release of the report was flagged by ASIC deputy chairman, Peter Kell at last week's Financial Services Council conference in Cairns, and industry insiders have told Money Management that the highly targeted nature of ASIC's inquiries make it likely that it will be severely critical of some aspects of industry conducted.
Money Management has been told that the ASIC examination of the sector involved first going to the major life/risk insurers to identify where the highest levels of switching were occurring and then closely examining those areas.
"It was very targeted in the sense of ASIC identifying where the problems were likely to be," one adviser said.
Kell signalled to last week's FSC conference that a report would be issued by ASIC soon, claimed that "poor advice around life insurance was still a problem".
Asked to comment on the forthcoming ASIC report, Association of Financial Advisers (AFA) chief executive, Brad Fox said his organisation would be meeting with the regulator to discuss the issue this week.
He said that from the AFA's perspective, he believed it needed to be recognised that meeting the client best interests duty needed to be taken into account as well as getting greater clarity around policy switching, lapse rates and churn.
"Getting some clarity around the language and what can be defined as acceptable would represent a good start," Fox said.
Fox said he had noted Kell's statement to the FSC conference that the industry had been grappling with the problem but had not gone far enough, fast enough.
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