Eighty-seven per cent of 352 respondents said that the LIF would not stop advisers churning.
Despite this result, ClearView managing director Simon Swanson, when asked whether he believed the life insurance reforms would improve the quality of advice and curb the number of churners in the industry, said there is not a lot of churning going on for the reforms to stop.
Mr Swanson said what was actually happening was advisers were “quite appropriately” moving clients into new policies on a regular basis due to life offices making substantial increases to policy premiums.
Clients were being faced with increases of “close to 20 and 30 per cent” to their premiums and complaining to their adviser about the cost, Mr Swanson said.
As a result, the client’s adviser went and found them a cheaper policy.
“That is not churning in my view. Churning is when a customer is moved from one product to another where the policy is inferior or the premiums are inferior,” he said.
Mr Swanson added that the biggest issue for the industry in terms of poor quality advice actually comes from a culture which has “permeated through very narrow approved product lists [APLs]”.
“Our view is, if you are vertically integrated it should be a requirement that you have every life insurer on your APL, [there should be] also the removal of volume bonuses, and shelf-based fees which clearly compromise advice,” he said.
“A part of this is at the dealer group level, of course, not at the adviser level and people forget that as well.”
Interesting Comments , I just came from an appointment with a Liberal Senator and reiterated the exact same thing, Even at the higher end of the market, price is important, quality does not always come up first, however he did tell me that most RISK advisers spend ten minutes putting together a Risk Plan for clients, Are you all serious, it takes me 20 hours from the time I compare all the companies premiums, then dissect definitions, the insurance companies financials, claims experience and then negotiate terms, present and complete, thats how long it takes, Im told the issue is vertically integrated advisers well well well, thank you to the banking industry again, insurance ought not to be available through BANKS, Real Estate Agents, accountant, Cole’s, Woolies, Real Life Insurance etc, nor should banks be able own an interest (OTHER THAN STOCK) in an Insurance company and visa versa, THE FPA, CPA and the Financial Services Council has had all the say, Now I’m going to have mine if you take 50% of the top line you must put something on the bottom line, if you go 80% upfront you must go 35% renewal and bring up the previous upfront renewal to from 5 and 10% to 20% eventually to 30 or 35%, Clawbacks have no place in this industry and simply are restrictive (They breach the trade practices act, fair trading and definitely PUT your clients interest LAST). ASICs research followed by Trowbridge was all researched on vertically integrated advisers and not the real risk guy, this reform will cost 5000 jobs no not 500, 5000. Who is the interested parties? let me tell you the FSC and its members only, they are the only ones that stand to profit not the consumer.
To sell Life insurance, we will all need a degree, yep thanks to the banks the CPA and the FPA you will need a university degree. I can see why because most financial planners are not risk advisers, yet risk advisers have been saying this for the past 20 years, we have been dragged along for the ride, in doing so you have destroyed the industry. Accountants, Real Estate agents Cole’s, Woolies, hell yeah Harvey Norman next, can all sell insurance and the industry wonders why its in a mess. To the industry itself CHURNERS, they were encouraged by the industry, take it from them and place it with us, you even introduced take over terms to make it simple. Reform nothing wrong with that, Profits up 30% Oh you only made 89 Million dollars profit last report , whatch us increase that by getting rid of the distribution channel. Is the industry serious? no but Peter Kell is and he has the wrong information handed to him.
Absolutely correct Simon!
Normal age and CPI indexation of clients premiums (at say age 50) can result in yearly premium increases of 23% or 24%. At this rate the client over a 3 year period could see
a premium increase by 100%. This increase is without any additional decision by
the Life Office to increase premium rates or State Government Stamp Duty
changes etc. This is just one example of a circumstance where the three year
responsibility period is unworkable and non commercial.