AMP’s Meller defines life/risk ‘churn’
The definition of life/risk churn has been outlined to a Parliamentary Committee by AMP Limited chief executive, Craig Meller.
Answering questions before the Parliamentary Joint Committee on Corporations and Financial Services, Meller said AMP would define 'churning' as “where an adviser has moved a client from one insurance policy to another where there is no benefit to the client, but a remuneration payment to the adviser”.
“If there is an appropriate benefit to the client then we would regard that as appropriate business, fulfilling the requirements of the best interest duty obligations under [the Future of Financial Advice] FOFA,” he said.
Meller said the consequences for any adviser who AMP found to be churning were “that we would terminate them immediately and, obviously, report that to [the Australian Securities and Investments Commission] ASIC under the breach-reporting requirements.
The AMP chief executive also pointed to the churn issue in the context of external advisers and said that as a manufacturer AMP carefully monitored lapse rates by individual advisers to see where there are elevated lapse rates – “so, business moving away from a policy”.
“If we see external advisers with high levels of lapse rates we usually just say, 'We're not prepared to write business with you anymore’,” he said.
Asked by Queensland Liberal member, Bert Van Manen what AMP would consider to be a high level of lapse rates, AMP representatives said it would depend on the business model being run by the adviser.
“For example, the age of the book and the level of new business they are writing. We seek to look at it on an individual basis. When we do see lapse rates that are elevated above the average for similar types of books—that might be 15 per cent or 20 per cent, depending on the nature of the business that an adviser has—our first port of call would be to discuss that with the adviser so that we can seek to understand what is happening there.”
They said that, as appropriate, AMP would also raise the issue with the licensee.
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