Committee urged to demand proper definition of ‘churn’

Risk advisers have begun renewing their appeals to a key Parliamentary Committee to reconsider the implications of the Life Insurance Framework (LIF) and the Government's underlying legislation, arguing that it fails to clearly define what constitutes real "churn".

New submissions to the Parliamentary Joint Committee on Corporations and Financial Services Review of the Life Insurance industry have urged members of the committee to ensure they have a better understanding of churn.

The submissions have coincided with answers to questions on notice from committee members from the Australian Securities and Investments Commission (ASIC) within which the regulator stated that "churn" is not a breach of the law and may well be in the client's best interests.

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In the most recent submission filed with the committee, Certified Financial Planner (CFP) and Pathway Financial Solutions principal, Greg Newton said that before both sides of parliament changed the operating landscape so dramatically, he believed it would be wise for them to "quantify how much ‘churn' there actually is in the industry".

And he said that by "churn", he did not mean policies that were simply cancelled by clients, hit an insurer-imposed expiry age, or ceased upon the payment of a life, total and permanent disability (TPD) or trauma claim or "many of the other triggers that insurers use to throw into the box of ‘policy cancellation'".

"In many cases the reporting systems used by insurers simply don't differentiate between a policy that is ‘cancelled' under any of the above scenarios versus a policy that is replaced by a new policy written with a different insurer. And unfortunately, it is these flawed statistics that are being used as a catalyst for this legislation," Newton said.

Another risk adviser, Nick Arkoudis used his recently-filed submission to also argue for committee members to insist on better data around the existence of churn.

"Factual data has proven that the issue with ‘adviser churn' is incorrect," he said, warning that "with these reforms, I will have no options but to downsize, let go of contractors and potentially wind down my business".

The Parliamentary Committee is due to report on 30 June.

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I cant see LIF getting up with this confusion now coming out into the open. It was ok to pass it before on the false assumption that we were all churners and burners, but now some truth is coming into the debate. People realise that churn is a fantasy land word that the execs of the life instos use in the sales meetings to deflect thier own bad performances and laziness. Its used to scapegoat every single ill of the life business. Well no more, FSC I spit on your submisisson and rub it in the dirt. A pathetic profit grab that's all this is and ever was. If they were worried about missold policies there would be no such thing as general advice product flogging.

Yep, exactly.

It is genuinely disgusting it got this far without 'churn' being defined and justified.

If the real concern is churn (as the industry defines it), all new insurance application ask a standard question if the new cover is to replace another policy and, if so, information regarding that policy, I would have thought it would be a more beneficial exercise for ASIC to request data on these applications from the new insurers, rather than data on all discontinued policies. They could then be cross referenced to determine if their is an issue.

Hi Nancy, they already ask this question on the forms, comminsure, AIA, TAL , Asteron ,etc they want all existing policy details and a note on polices that are to be replaced if any, this data although probably not shared between competitors, is noted on the application forms and probably available if ASIC requested it.

That's exactly what I'm saying TJ......why aren't they using the relevant info rather than requesting much that is irrelevant. The politicians have been using the word 'churn' incorrectly for months/years, as have many journalists. It simply confuses the issue.

Hi Nancy, yes I agree 1000% sorry I misread your comment, you know why though, as they already have the outcome they are looking for, the FSC drives this, they want to drive policy and make profits from it, if this isn't conflict of interest I dont know what is. why would they share data that could actually point to the fact that they are the ones rdoing the wrong thing ? Advisers , yes they rip them off by reducing commission, clients they rip them off by increasing premiums by 5% extra every few years due to "claims experience" and other nasty tricks. Offer group insurance at dirt cheap prices with not even seperating smokers and non smokers to chase market share, and make the losses back from our fully underwritten clients. Reduce commissions saying consumers asked for it even though the only groups pushing were the ISA and the FSC! . They dont want to delve too deep as it wouldnt suit the FSC's agenda, they are too powerful and need to be disbanded imo. These instos have enough power by themselves let alone having these cartels actually forming government policy.

Having been selling insurance since 1989, I can report that I have encountered very few instances of real Churn for the sake of getting new commissions. I have had experience with Capita, MLC, AMP and other licensees and only less than 10 cases have been investigated to my knowledge in these past 27 years.
On the other hand there have always been legitimate reasons to change Policies and/or insurers.
The misinformation on this subject is either from ISA or the Product houses and I would blame ISA first as first guess.
Whatever the arguments, clients need advisers if their true insurance needs are to be examined and taken up. None of Industry Fund operators, across the counter operators, phone operators or robots will sit down with clients to gather data, analyse and research and recommend solutions, and assist with underwriting and medical examinations. All this takes valuable time and at present Advisers can provide this service if Commissions are at 120% up-front. Advisers do aim to benefit the client so that the client remains covered for Life's Risks, stays loyal and appreciative over many, many years.

Have to disagree with you there. Havent been in the industry as long as you have I have seen it plenty.

Thing is, its a minority that does it. It gets reported and nothing gets done with it. Every insurer and BDM knows who is behind it, but nothing gets done about it. Make an example of these people and problem solved.

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