ASIC must ‘intervene’ on FSC’s APL plans

ASIC must address the FSC's code of conduct and its intentions to widen APLs before the legislation to bring the Life Insurance Framework (LIF) into effect is passed, ClearView has argued.

In a submission to the Senate Economics Legislation Committee in response to the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016, ClearView said that before the legislation is passed, ASIC must review the code of conduct and the presence of "conflicted" APLs.

"We believe that ASIC should urgently intervene in the industry/FSC process. It is critical that a code and standard is produced that is highly effective in changing the culture and perception of the life insurance industry in a meaningful way," the submission said.

"Without such urgent action from ASIC, irreparable damage will be caused to the industry and to customers receiving advice from advisers operating under conflicted APLs.

"The FSC is not an independent body and the very members to which that standard will apply are developing their own rules in relation to APLs," the submission stated.

ClearView added it is "entirely unclear" how advisers can be expected to achieve a higher level of professionalism when licensees are allowed to operate an APL with only two products.

"A conflicted APL is structurally adverse to improved life insurance customer outcomes. A conflicted APL is even more damaging than conflicted remuneration," said ClearView.

"With conflicted remuneration, the customer has a choice of product but a choice affected by adviser bias through conflicted remuneration. A conflicted APL by definition deprives the customer, and the adviser, of choice."

"It is submitted that conflicted APLs must be dealt with as an integral part of the LIF package to improve life insurance customer outcomes and that a model of open architecture must be embraced," ClearView said.

ClearView's submission also highlighted that in all "other industries" the process and content for a code follows ASIC RG 183 and is supported by thorough consultation with the widest group of stakeholders, but added that the FSC has "not adopted any of these standard mitigants".

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