Ms O’Dwyer told ifa’s sister publication, Risk Adviser, that ASIC will be reviewing replacement policy data from the beginning of the 2016-17 financial year.
“The 2018 ASIC review will assess whether the government’s reforms have significantly addressed the issue of churn through better aligning the interests of advisers and consumers,” Ms O’Dwyer said.
“Life insurers will be required to report policy replacement data to ASIC from 1 July 2016, and the review will be conducted in 2018 in order for ASIC to collect information after the reforms have been in place for two years.
“If the review does not identify significant improvement, the government will move to mandate level commissions, as was recommended by the Murray Inquiry,” she added.
However, it is still unclear whether the corporate regulator will undertake a review with the same sample size as the initial ASIC Review 413, which Ms O’Dwyer said was “intended to build an understanding of the advice consumers were receiving about life insurance and to identify opportunities to promote advice that is in the best interests of consumers”.
Ms O’Dwyer added that the government’s legislation will reduce the “incentive” for advisers to replace risk policies.
She also pointed out that the enforcement of a two-year clawback policy will act as a “disincentive to churn policies”.
To truly “determine whether the Life Insurance Framework legislation will address the issue of ‘churning'” the insurers need to provide replacement policy data for the previous 5 to 10 years to firstly show that there is, in fact, an issue to begin with and secondly to have a base of information to compare against. Even then, the information needs to be qualified in terms of why a policy has been replaced. i.e. better price, policy definitions, inadequate sum(s) insured. It seems that “replacement” and “churn” are becoming interchangeable terms in this debate which any adviser knows is farcical. If there is a current problem with churning, how can anyone “identify significant improvement” without the information from previous years.
Whilst I agree reform is an ongoing evolution of life and was necessary in the Life Insurance industry.
This “Churn” data should have been produced before the significant changes against advisers to boost institutional profits were passed under the LIF.
The whole premise of the LIF is based on “Churn” yet the data does not exist, or the institutions don’t want to provide it as it’s not as big a problem as they want it too seem.
O’Dwyer, the Minister for Financial Institutions is already clearly flagging a move to Level Commissions.
O’Dwyer, please don’t pretend you have any interest in small business advisers when everything you do favours the your old work buddies in the institutions. You are a disgrace to the Liberal Small Business community.