Advisers should examine life policies under Best Interest Duty
Risk advisers will need to investigate every life insurance policy held by a client, even if they are not on the adviser's approved product list, under the provisions of the incoming Best Interest Duty (BID) requirements.
However this should not be regarded as an impost but an opportunity to ensure life insurance coverage is appropriate for the clients according to CommInsure InsuranceTech executive manager Jeffrey Scott.
Scott, speaking at the recent Synchron conference, said that recent regulatory changes would result in the BID requirements impacting risk advisers in a significant way since under the Safe Harbour provisions they would be required to examine any existing life insurance products held by the client.
According to Scott advisers will be required to examine life insurance products, even if they are not on the adviser's approved products list (APL), and use this examine to demonstrate the value of their advice and that they are acting in the best interest of the client.
"If a client walks into your office and they have an existing direct policy, retail policy, or have life insurance via an industry super fund, even though these products may not be on your APL, you now have an obligation to your client under the Best Interests Duty to investigate these products and compare them against products you are going to recommend," he said.
"Risk advisers have the ability to demonstrate they have acted in the best interests of the client by comparing: premiums, underwriting terms, conditions of release, exclusions, ancillary benefits, preclusions periods, ability to remove benefits and features, and cessation of benefits."
Scott said advisers should not regard the new BID requirements as extra work and claimed they were the renamed portions of the Know Your Client Rule and the Know Your Product Rule from the 2004 Financial Service Reform Act.
"The responsibility for an adviser to provide excellent advice to client has not changed. You now need an appropriate audit trail to ensure that if something happened, someone could take your file and defend your actions and advice without you saying a word."
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