Examination of churn will lead to commission debate

commissions ASIC risk insurance financial planning fee-for-service advice SOA australian securities and investments commission director

18 August 2014
| By Jason |
image
image
expand image

The upcoming report on risk insurance churn to be released by the Australian Securities and Investments Commission (ASIC) is likely to lead to further debate on removing commissions but would not examine the total cost of advice related to risk insurance according to Synchron director Don Trapnell.

He said ASIC is taking a balanced view of churn and is seeking data on those most involved with the practice, which was to be expected of the regulator, but was concerned that any debate on commissions would not recognise how risk advice was remunerated.

"Advice can be provided on insurance but if it is not purchased the adviser is not paid. Risk advisers receive payment by results and most of the work is in the first year where there is the most cost to deliver the advice which is why there is an upfront commission," Trapnell said.

"Renewal commissions come into focus at the time of claim when the adviser acts to have the claim paid and all that work is paid upfront via commissions."

Trapnell said underwriters within insurers should also be working to prevent churn by examining policies and ensuring they are not been rolled from one insurer to another in rapid succession.

"If an existing policy is in force the insurers will know it has to be cancelled. However if it was churned over to them it can be churned away from them and underwriters can protect the insurer's book of business by checking whether this is the case," Trapnell said.

"Insurers have asked me how an underwriter can see and understand the Statement of Advice (SOA) that goes with the insurance but our clients understand them. If the SOA has a best interests duty and safe harbour provisions included an underwriter should be able to see and understand that."

Read more about:

AUTHOR

 

Recommended for you

 

MARKET INSIGHTS

sub-bg sidebar subscription

Never miss the latest news and developments in wealth management industry

Graeme

FWIW I am a long term holder of both. I am relaxed about my LICs trading at a discount. Part of a cycle. I would like...

2 days 14 hours ago
Ross Smith

The term "The democratisation of private assets continues to gain steam" is marketing misleading. There is no democracy...

2 days 16 hours ago
Greg

I have passed this exam, and it is not easy or fair exam. It's no wonder that advisers are falsifying their results. ...

5 days 16 hours ago

AustralianSuper and Australian Retirement Trust have posted the financial results for the 2022–23 financial year for their combined 5.3 million members....

9 months 3 weeks ago

A $34 billion fund has come out on top with a 13.3 per cent return in the last 12 months, beating out mega funds like Australian Retirement Trust and Aware Super. ...

9 months 2 weeks ago

The verdict in the class action case against AMP Financial Planning has been delivered in the Federal Court by Justice Moshinsky....

9 months 3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND