Planners warned about 'churn'

Australian insurers and financial planners need to address the issue of ‘churn’, according to the chief executive of Suncorp Life, Geoff Summerhayes (pictured).

Summerhayes has told the Financial Services Council (FSC) annual Life Insurance Conference in Sydney that, until recently, one in six new business applications for life insurance had been churned from one provider to another, primarily under advice from a planner.

“Today that figure may be as high as one in three,” he said.

Summerhayes warned that such a model was not sustainable and sent a negative signal to Australian consumers.

“Surely, the viability of our sector rests in making our products an services appealing to the 45 per cent of Australians with no life cover, rather than churning and cannibalising our existing customer base,” he said.

Summerhayes also referred to the work being done by the FSC to explain to the Federal Government the position of the life insurance sector with respect to the Future of Financial Advice (FOFA) proposals.

He said there had been significant industry efforts to explain to the Assistant Treasurer, Bill Shorten, that a ban on adviser commissions for life insurance would make advice unaffordable for many Australians “with the obvious consequence for underinsurance”.

Summerhayes said that in this context he expected changes to the design of life insurance products so that they provided consumers with genuine choice about how they could pay for their financial advice, and improved disclosure of adviser remuneration for life risk.

He said such developments would help advisers to meet the statutory requirement to always act in the consumer’s best interest and would go a long way to improving consumer trust.