Life insurance premiums are likely to increase, while advisers will be forced out of the industry, if the recommendations made in the Trowbridge Report are implemented, Synchron director, Don Trapnell, warns.
In an internal Synchron report, Trapnell and the company’s independent chair, Michael Harrison, warned that insurers they had spoken to had indicated that premiums were likely to increase due to higher administration costs, despite the Trowbridge Report’s forecast of a five per cent decline in premiums.
Trapnell and Harrison said the objectives of the Trowbridge Report could be met through “improved product design and smarter underwriting”.
“We support the concept of a Dealer Group fee (as recommended by Trowbridge) to offset the cost of compliance monitoring, education, professional development and other Dealer Group expenses however we believe it needs to be in the three to four per cent range. We also support the banning of ‘shelf-space’ and other incentive payments,” Trapnell and Harrison’s report said.
“We do not support the IAP (Initial Advice Payment) as it will be hard to administer and potentially open to abuse by the creation of multiple policy owners.
“Based on our research the Trowbridge ‘operating loss’ proposal is counter-productive for two reasons:
It will be virtually impossible for new entrants to enter the business unless they become “tied” to the vertically integrated model as salaried advisers, thus reducing consumer choice.
A significant number of advisers will be forced to either exit the industry or reduce staff numbers (which is likely to impact on the standard of adviser compliance).”
The Synchron report claimed that its model would result in longer responsibility periods and a reduced incentive to churn as level premiums would be difficult to replace.
