The Financial Services Council (FSC) has renewed its push for the Government to clear the way for product rationalisation and the orderly retirement of legacy products.
FSC chief executive, Sally Loane portrayed production rationalisation as a further step in the life insurance reform process in line with higher professional standards for financial advisers and the Life Insurance Framework (LIF).
Referring to the professional standards changes and the LIF, Loane said both would strengthen consumer outcomes and benefit the financial advice and life insurance sectors, but pointed to product rationalisation as a further step.
“Wwe can deliver even better outcomes for consumers – not by introducing a product design and distribution obligation – but instead by introducing product rationalisation for life insurance products and managed investment schemes,” she said.
In doing so, Loane said current financial services laws rendered the rationalisation of financial products as either too difficult or too expensive.
“Customers are effectively locked into out-dated or uneconomic financial products and industry participants are locked into out-dated technology systems that are increasingly difficult to support,” she said.
Loane sought to reinforce her message by citing a number of examples including the FSC having one life insurance company member which needed to hire a computer programmer fluent in FORTRAN – a programming language developed in the 1950s, to implement a regulatory system change,
As well, she cited another insurer which had customer records stored on microfiche and a superannuation fund which had to find a spare part on eBay to keep one of its legacy systems operational because the manufacturer doesn’t make or supply it anymore.
“Surely, in 2017, the government can progress and implement a product rationalisation timetable soon. It’s only been 15 years in the making,” Loane said.
