Coalition wants self-regulation on churn
The life/risk industry would be well-advised to develop a self-regulatory approach to churn irrespective of which party wins Government at the scheduled 14 September Federal Election.
The Shadow Assistant Treasurer, Senator Mathias Cormann, has told Money Management that to the degree to which churning exists within the life/risk sector, it is the Coalition's preference that the industry self-regulate on the issue.
The Opposition spokesman said he had seen no definitive data on the level of churn, but believed an agreed industry framework would be an appropriate approach.
His comments came last week as the Financial Services Council (FSC) reacted to a letter from the Minister for Financial Services, Bill Shorten, and consultations with the Australian Securities and Investments Commission (ASIC) by declaring the FSC would be resuming its efforts to implement an anti-churn framework for the sector.
In his letter to the FSC, Shorten said that while he recognised the difficulties associated with achieving a consensus, "I remain firmly of the view that achieving a satisfactory outcome in this area is critical to enhancing advice to consumers in relation to insurance products, particularly in the context of life insurance".
His letter added, "I note that ASIC continues to consider excessive churn to be a genuine issue in this sector of the industry".
The Shorten letter emphasised ASIC's involvement by noting "I have copied this letter to Mr Peter Kell at ASIC".
Discussing the implications of the letter and the feedback from ASIC, FSC chief executive John Brogden said he believed it would be "highly irresponsible" of the industry not to seek to put in place a self-regulatory framework.
As well, a senior ASIC officer had just one day earlier told a Money Management event that the regulator would be closely examining the question of churn, including undertaking surveillance where appropriate.
Consistent with Shorten's letter, Brogden said that the FSC would be seeking to obviate any competition issues by evolving the implementation of an anti-churn framework by discussing the issue with the competition regulator, the Australian Competition and Consumer Commission (ACCC).
Association of Financial Advisers chief executive Brad Fox has said his organisation would re-engage with the FSC in discussing the framework, but added that the major insurers also needed to become involved to ensure the appropriate data around churn was provided.
For his part, Brogden acknowledged that the FSC's big insurer members had a role to play in arriving at an appropriate framework
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