Don’t focus solely on advisers on churn
Adviser remuneration is only a small part of the overall answer to addressing incidences of life/risk churn, according to Association of Financial Advisers chief executive Brad Fox.
Speaking to Money Management ahead of participating alongside Financial Services Council (FSC) chief executive, John Brogden, and Australian Securities and Investments Commission (ASIC) deputy chairman, Peter Kell, at the FSC conference, Fox said the parties needed to understand the complexities of the issue.
"Focusing solely on adviser remuneration may represent a quick fix, but it will not address the broader underlying problems," he said.
Fox said that an approach based on adviser remuneration did not represent an appropriate policy approach on its own, with other factors such as the product design and distribution also needing to be taken into consideration.
He said that before parties went looking for answers, they needed to acknowledge problems such as the 40 per cent lapse rate with respect to direct insurance, and the vital role of advisers in addressing such problems.
The chief executive of the FSC, John Brogden, restarted the debate on life/risk churn in response to a letter from the former Minister for Financial Services, Bill Shorten, and to signals from senior ASIC executives, including Kell, that the regulator regarded life/risk churn as still being a problem.
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.
