LIF legislation will end churn – O’Dwyer

The legislation underpinning the Life Insurance Framework (LIF) will be introduced to the Parliament next week, with the Minister for Revenue and Financial Services, Kelly O'Dwyer, referencing "churning" as a major reason for the changes.

Speaking on national radio, O'Dwyer made the Government's position clear stating that the legislation would "make sure the current conflict that exists right now, where life insurers can have 120 per cent of a premium in an upfront commission, can no longer continue because they are churning through clients".

The impact of the LIF legislation will be debated by a panel, including Bombora Advice head, Wayne Handley, at a Money Management breakfast on 27 October.

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The minister's comments came barely 24 hours ahead of an extraordinary general meeting (EGM) of the Association of Financial Advisers (AFA) which will debate constitutional changes aimed at avoiding a repeat of the LIF processes.

The minister said that the churning had been identified in three separate reviews.

O'Dwyer referenced the LIF in the context of legislative reform packages necessary to restore consumer confidence in the financial services sector, saying that the sector had not always lived up to expectations.

"We have got legislation now prepared that will be brought into Parliament this year to actually raise the standards for financial advisers, raise their training, ethical and professional standards that will mean they are held to a much, much higher standard. It will make it much more difficult for somebody to go to a dodgy financial adviser and get bad financial advice," she said.

"We're bringing in legislation next week for life insurers to make sure that the current conflict that exists right now, where life insurers can have 120 per cent of a premium in an upfront commission, can no longer continue because they are churning through clients according to three separate reviews."

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The reason you almost lost the election is because the financial services sector moved there votes to the independents who listen to us and not ignore the issue of the survival of the Independent Financial Planners who specialize in risk insurances.
Our cost of operations has increased by 30% from the introduction of dealer groups and the big insurers banks paid us the 110% fist year as a trade off for their responsibilities and to help us survive the costs of paying all our operating costs, they have saved 100s of millions by having us all operate through dealer groups and now to top it all off they are going to screw us again, this is total political bank minded corruption and no government should be allowed to specify earnings to a product that is sold by specialist advisers. Next election Liberals will be gone and these smart ministers will be doing what they deserve.

Yes Kelly, LIF will remove churn just as effectively as amputation removes a sprained ankle.

There are more targeted ways to remove churn that won't have the drastic side effect of killing off access to affordable advice. One such way would be to introduce a Best Interests Duty.

Hang on, didn't we just do that? So shouldn't we be reviewing the incidence of churn SINCE the introduction of Best Interest Duty, to see if churn is still a problem? It seems like some vested commercial interests would rather rely on outdated studies, to justify their real agenda of removing consumers' access to affordable advice.

If churn is not in the clients best interest then it is already against the law. Why doesn't O'Dwyer enforce the existing law?

Seriously this Minister just does not get it and every time she opens her mouth confirms this. Churn is the biggest smokescreen sold to people who make decisions on an industry who have no idea how it works and this was shown to be true when the same people during the election didn't know how to explain or understand a TTR strategy. What a disaster they are trying to deliver to our Industry.

I 'churned' a few policies for a client the other week... Life, TPD, IP and Trauma the client had set up 6 months ago by approaching a retail insurer directly...

I should mention the reason for this 'churn' was that I was able to get all of his loadings waived and an exclusion changed to be significantly less broad than the existing policy. Client now has greater chance of a claim and is saving over $6,000 per year...

I offer both fee for service and commission as a payment option, client chose commission option and without it he wouldn't have proceeded as I couldn't guarantee whether the loadings or exclusion could be waived/altered and he didn't want to potentially pay a fee for nothing.

bugger me Reality....a logical and common sense approach by the consumer you assisted perfectly and in HIS BEST INTERESTS!!! .....and what?? you got paid for providing a service....WTF! how novel is that?????? happy client....again, WTF!?
isn't that what really measures it all, apart from a claim payout when/if it happens? why has everything that was so simple become so complicated?????

Why the "Firetruck" is Kelly O'Dwyer allowed to affect my career, business and income when the reason she wants change is unjustified? Not only that there is no definition for Churn.
I whole heartedly agree with Robert Coyte's comments too.
I have sent emails to my local MPs as suggested by the LICG, but I still feel that I am just getting wet, wizzing into the wind.
Does Kelly have a boss that she report's too that can bring her into line?
Yes I am naïve but I want to do more than just wiz into the wind.

Wonder how many money Kelly added to the NAB sale of MLC to Nippon Life through this little scam !

Could be the next 4 Corners story

All very cosy in the seat of Higgins

Nothing to do with churn

The independent advisers were just the low hanging fruit to be used and abused !

Personally I don't appreciate being defamed by Ms O'Dwyer

You go on radio and intentionally misrepresent the entire advice sector based on a flawed small example of the worst advisers in the industry

You defame one of us you defame all of us !

Any 'churn' stopped under this arrangement will be that which is detrimental to the client. Client's will be encouraged to keep inferior arrangements in place. This of course puts me as an adviser at risk of not satisfying best interest. Conversely if I act in the client's best interest I will be punished financially because of the new rules. The only interest here is the conflict of interest this puts me under. As a result I won't be writing any more risk unless specifically requested to do so - it will be scoped out of every SOA I produce. This in turn of course will be to the detriment of the population but it will satisfy the Govt and the union super funds. On the positive side though it will save me a hell of a lot of unpaid work that the manufacturers and the Govt want me to do.

This Govt cannot get anything right - and that's when they actually DO SOMETHING. Their patent inability to comprehend what they were tinkering with saw them stuff the superannuation rules - they defiantly took this to the election which cost them votes & then they relented after nearly losing office. Hello? Thick as 2 planks. And yet they don't learn - fresh from the election disaster they now seek to punish one section of an industry they draw significant support from. The unions and their super funds will be cheering O'Dwyers every word.

I have to say that I am sick to death of living in a country where the state relentlessly seeks to pry into, dominate and control every aspect of the populations daily existence. It's time to change the anthem because we sure aren't 'young & free'.

Well said Greendog and to all the other posts here what is wrong with this bunch that they don't listen to what is really happening to the industry, the real people and our clients who are going to be the biggest loser when the dust settles.

Funnily enough, another insurer recently announced that they will pay full initial commissions on existing clients moved from their old products to their new ones....

This is clearly because the old policies had definitions more likely leading to claim. Full underwriting and responsibility period required again.

Investigate that, Kelly.

Yes, I've had a BDM suggest this was the like getting the christmas turkey early. disgraceful.

If a client moves from one direct insurance provider to another direct insurance provider within say, a six month period, is that churn?

I wonder if FOS disputes will increase now because adviser will implement and Engagement of Services contract, which if the client cancels their policy within 2 years of acceptance the Adviser will bill them $X to re-coupe their costs. Based on cost to provide advice, do you think consumers will be happy with a $2,000+ bill?

No Claude, because I doubt the client will sign the Engagement on that basis?

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