ASIC convinces parliamentarians on life/risk advice
A key Parliamentary committee appears to have accepted the explanations of the Australian Securities and Investments Commission (ASIC) with respect to the number of potentially non-compliant financial advisers in the life insurance industry.
The House of Representatives Standing Committee on Economics dedicated a section of its report emanating out of its Review of the ASIC Annual Report, to the regulator’s assessment of life/risk advice and, in particular, confusion around how many advisers might have been guilty of churn.
In doing so, the committee chairman, David Coleman said it had “noted current public confusion regarding statements made by ASIC in relation to the number of potentially non-compliant financial advisers in the life insurance industry”.
“The committee asked ASIC for clarification of whether it believes 50 financial advisers were at greater risk of having high lapse rates, or whether 50 per cent of advisors were potentially non-compliant,” Coleman said in his report.
He said that ASIC had noted that it was currently collecting data about advisors with high life insurance lapse rates and explained: “As part of the initial data that came through, we identified around 500 advisers with potential issues around higher levels of lapse rates. Of course, there may be quite legitimate reasons why people are being switched or moved between products. We can't go in and undertake high-intensity surveillance of every single one of those. We've narrowed it down to a much smaller pool in the first instance to go and look at and do more in-depth surveillance”
Coleman’s report said that while ASIC remarked that some media articles suggested only those people were possibly causing problems, it added that ‘we are still, unfortunately seeing some problematic advice around life insurance in the surveillances that we undertake’.
“ASIC added that the potential number of non-compliant financial advisers in the life insurance industry is ‘not limited just to that smaller target group that has come up through our first data-gathering exercise.’”
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
