Insurers to report policy replacement data from July
In order to determine whether the Life Insurance Framework legislation will address the issue of 'churning', all insurers will be required to hand over all replacement policy data to ASIC from 1 July 2016, says Assistant Treasurer Kelly O'Dwyer.
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".
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