Defining lapses still core LIF issue
The proposed three year responsibility period continues to sit at the centre of negotiations around the Life Insurance Framework, with the Association of Financial Advisers (AFA) demanding clarity from the insurers around lapses.
AFA chief executive, Brad Fox, said he believed the insurers needed to clearly differentiate between the different types of lapses for the new regime to have genuine meaning and to work.
"If the insurers cannot differentiate between the different types of lapses and how they occur, then the three-year responsibility period is simply going to be too long," he said.
Fox said that, as things currently stand, the lack of clear differentiation between what is and is not lapse was putting too much responsibility on the shoulders of advisers.
"It is effectively shifting the burden from the insurers to advisers," he said.
Ironically, the lack of clarity around what is and is not a lapse represents the same stumbling block which stood in the way of the industry reaching agreement on a life/risk formula nearly five years ago.
In the meantime, it is understood that the Assistant Treasurer, Josh Frydenberg, has not yet taken the issue to Cabinet.
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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.
