Three life insurance executives were grilled during the AFA's Life Insurance Roadshow in Sydney yesterday about the three-year responsibility period proposed in the Life Insurance Framework.
In a panel discussion held as part of the roadshow, executives from life insurers TAL, Zurich and AIA Australia were probed by advisers seeking clarification of the three-year clawback policy.
When asked by advisers about what types of lapse would fall within the criteria for the policy, TAL general manager of retail distribution Niall McConville said a policy being cancelled due to a claim would not lead to a clawback.
However, Mr McConville added that if a policy were to lapse due to another adviser rewriting a client into a new product, or a client cancelling the policy within the three-year period, then there will be a clawback on the commission earned for that policy.
Zurich general manager of retail life and investments Philip Kewin echoed Mr McConville's comments, while adding that he understood the concerns advisers have about the proposed policy.
"I know this is an area of concern, and there are circumstances where clients will lapse in the first three years which may be completely out of [advisers'] control," Mr Kewin said.
AFA chief executive Brad Fox – acting as the panel moderator – said the greatest concern regarding the clawback policy was the lack of a definition of what constitutes a lapse.
"The issue is what is included in the definition of a lapse [and what isn't]," Mr Fox said.
"A nice little starting point is to look at paragraph 111 of ASIC report 413, because that has actually defined a lapse and ruled out a number of things which – and I think advisers would agree – should be ruled out as a lapse," he said.
AIA Australia's chief retail insurance officer, Pina Sciarrone, then agreed that a set definition for lapses needs to be established.
Ms Sciarrone added that the cost of insurance policies is an area that needs to be focused on when looking at lapses.
"Affordability, which has been discussed [as an issue for the clawback period] is absolutely valid and we need to be looking at what does it mean in terms of life insurance lapses," she said.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 15 Feb 2019ASIC to undertake harsher penalties against banksBy Eliot Hastie
- 15 Feb 2019Court restrains unlicensed firm from operatingBy Adrian Flores
- 15 Feb 2019ASIC used Dover whistleblowing to shut licensee downBy Adrian Flores
- 15 Feb 2019Minimal time spent on client engagement, survey findsBy Adrian Flores
- 15 Feb 2019Advice regtech aims to ease CPD burden under FASEABy Adrian Flores
- 14 Feb 2019AMP adviser network declined 4.6% in 2018By Adrian Flores
- view all