In a statement reflecting on their recent fact-finding mission to the UK, Synchron directors Don Trapnell and Michael Harrison said insurance providers need to “step up to the plate” by being transparent about their positions on contentious adviser remuneration issues and taking greater responsibility for the sector’s problems.
The dealer group bosses slammed the Trowbridge Report and the lacklustre response from insurers, describing the LIAWG process as having been “discredited” by the contents of the FSC’s submission which they say is “virtually mirrored in Trowbridge’s recommendations”.
“Instead of considering product innovation, Mr Trowbridge chose to focus on adviser remuneration and relied heavily on the conclusions drawn in the ASIC review,” Mr Trapnell and Mr Harrison said.
The joint statement also accuses insurers of doing little to eliminate churning, arguing they have “declined to act and are seeking Government intervention to bypass the ACCC and do the job for them”, suggesting that fear of being a “first mover” is leading to the inertia.
The statement also points out that in comparable markets, such as the UK and South Africa, insurers have helped eliminate churning by extending responsibility periods – a policy categorically opposed by Mr Trowbridge.
The comments come as the AFA also calls on insurers to make their submissions public, criticising the report in no uncertain terms.
The AFA’s submission to the LIAWG can be found here: http://www.afa.asn.au/documents/item/777
Surely the insurers and product manufacturers who provided submissions to the LIAWG morally and ethically owe it to their supportive advisers to release their submissions.
To not release this information creates uncertainty and mistrust between the advisers and insurers regarding what now may be being said verbally and exactly what detail was included within each of the submissions.
If these insurers truly respect and value the adviser relationship, then it is now time to disclose exactly what their stance was in regard to the LIAWG and the resulting Trowbridge report.
No doubt they are being advised from legal to sit tight and not expose themselves to any undue conflict or questions which may affect business production, but accepting adviser’s business whilst in the knowledge of having provided a submission to the LIAWG that may have clearly supported the unworkable position on remuneration put forward in the Trowbridge report is deception.
Extended responsibility periods for term (which we used to call “Temporary” Insurance)is a bit dangerous. were we dealing with Whole of life and endowment insurance, extended responsibility periods would be ideal
The government cant and wont be prescriptive. No political party will tell a business what the limit is on their income so its up to the various factions in the industry to work it out and accept it.
Why cant the insurers simply double the trail they are paying the advisers and move to level commission. The extra trail will have a 3 year responsibility period, there will be no churn as the existing adviser wont want to move it and there is little incentive for another adviser to “review”them. The advisers will have money with which to bring your advisers through or a book that has retained its value and can be sold to a larger advice firm. The market will determine what % level of commission is correct. The insurers interests, the advisers interests and the clients interests are now aligned. No more fighting with Insurance companies. We are financial planners, we are creative (which is why ASIC hate us) lets use our creativity for good.
Constantly impressed with Don…
Just imagine if we had him, or someone of his calibre, in charge of the FPA & AFA…
It is very well known who the churners are. Insurer’s need to step up to the plate and have a prepardness to call these people out.
The time and cost which the directors of Synchron have gone to in order to research and present relevant information in this debate is very much appreciated. The UK experience highlights that we need to tread very carefully down this ‘new’ path on risk advice and protection sustainability.
Hera Hit, Don and Michael. Insurers are not prepared to do the hard yards with churning, they want advisers to take the hit.