Life insurance approved product lists (APLs) from vertically-integrated advice licensees should be banned as institutions are unable to properly manage conflicts of interests, according to whistleblower Jeff Morris.
In a ClearView commissioned paper, Morris said institutionally-aligned Australian Financial Services Licensees (AFSLs) continued to funnel new clients into in-house products which was a potential breach in best interests duty obligations.
“In putting this paper together, it became clear that institutionally-aligned AFSLs knew all the right things to say and how to look remorseful but scratch the surface and there have been no real changes to the culture and practices inside these organisations,” Morris said.
“Heavily-restricted life insurance APLs are still the norm and not even heat from the recent Financial Services Royal Commission has been enough to compel them to apply higher standards and put their clients first.”
The paper claimed there was no reasonable basis to exclude any of the 12 retail life insurers regulated with the Australian Prudential Regulation Authority and that there was a distinct lack of innovation in the life insurance to limited APLs.
“APLs are at odds with the government’s agenda and changing community standards, and it is time for unrestricted choice of life insurance provider to be mandated,” Morris said.
Commenting, ClearView managing director, Simon Swanson, said while most people did not deliberately act in bad faith it was no accident that the vast majority of clients connected to an institutionally-aligned financial adviser found their way into in-house products.
“If the regulator agrees that this is not a coincidence but rather the orchestrated outcome of flawed processes then they must act to ban restricted APLs,” Swanson said.