While the inappropriate replacement of insurance policies has been at the very centre of the debate around reforming the life insurance sector, Zurich says 'churning' can be managed by insurers.
In a submission to the Senate Economics Legislation Committee in response to The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016, Zurich said while it is appropriate for ASIC to monitor the retention of policies, it can be done so by an insurer.
"For many observers, the spectre of inappropriate policy replacement is at the very centre of this debate and is the ultimate demonstration of poor advice," the submission said.
"We believe our own retention rates prove the problem of 'churn' is one that can be satisfactorily self-managed by insurers, and that whilst regulator monitoring is appropriate, regulator intervention is not necessary."
Zurich also added that the "perceived high incidence" of policy replacement is often put down as a major issue in terms of customer outcomes, but life insurers have taken a more "proactive approach" to managing customer retention.
This managing of customer retention over the last few years has led to a "clearly evident" positive impact.
Following the commencement of the LIF, the corporate regulator is scheduled to conduct another review of the life sector to determine whether the reforms are actually are having an effect on the industry.
Should the review find that the reforms are not leading to appropriate consumer outcomes, the government says it will mandate level commissions across the industry.
However, Zurich has said it is not supportive of any move to a level only commission regime, nor one where up-front caps are lower than those already proposed.
"We therefore believe it is vital that all stakeholders have absolute clarity about the methodology, metrics, and objectives that will be used to [determine] whether the reforms have achieved the intended outcomes," the submission said.
"While we believe the reforms will have some immediate impact, we believe a minimum of three years is required before any substantial impact can be properly measured."
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