FSC moves to reduce churn
The Financial Services Council (FSC) has moved to reduce churn in the life insurance industry via a uniform approach to commissions.
The FSC's approach has been unveiled by the organisation's chief executive at its annual conference on the Gold Coast today.
Brogden pointed to ongoing concern around the level of policy churn and said he believed the initiative would go some way towards addressing the problem.
The announcement came just hours after the Assistant Treasurer, Bill Shorten, announced the Government was prepared to cede ground on commissions on individually advised risk products within superannuation.
Brogden said the FSC had moved to develop a binding standard to stop churning.
He said it was intended to have agreement around the binding standard by 2012 for implementation with the FOFA legislation.
Brogden said the standard would help meet the best interests test.
Suncorp-aligned life insurer Asteron supported the FSC’s stance, stating that appropriate risk management is needed at underwriting to protect the integrity of advisers’ book of business and their clients’ cover.
Asteron also pointed out that not all replacement business is churn, stating that it is vital for advisers to review their clients’ insurance portfolio to ensure that it is both appropriate and competitive.
“A two-year ‘adviser responsibility period’ is an important first step to self-regulation. However, our own experience shows that policy cancellations due to adviser recommendation combined with rising cost pressures and lack of affordability for clients occurs mostly between 3 and 7 years,” Asteron stated.
AUTHOR
Mike Taylor
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