Following two recent reports from ASIC that provided “conflicting messages” regarding the number of advisers suspected of churning, the AFA is pushing for transparency and certainty around the regulator’s methodology for its 2021 review into the industry.
In a statement, chief executive Philip Kewin said the 2021 review will be critical to life insurance advisers as the government “intends to assess the success of the LIF reforms” based off the level of improvement identified by the review.
The AFA is pushing for ASIC to include a random sample of life insurance advice into its review in addition to any targeted sample in order to assess “the real message about the quality of life insurance advice”, and also wants deeper analysis into the causes of poor advice.
Additionally, the AFA said that while ongoing surveillance is a normal part of ASIC’s function, the review of the sector for the 2021 report should not be based off advice given prior to 1 January 2020 when the LIF reforms are fully implemented, to ensure the review assesses the impact the reforms have had.
“The correct assessment is vitally important to both consumer trust as well as previous suggestions that LIF is just a transition phase to level commissions,” the statement said.
Among other measures the AFA wants to see included in the review are:
- All elements of the financial services industry to call out and confront poor conduct by financial advisers;
- Life insurers to publicly disclose the number of advisers who they refuse to do business with or have placed on level commission only terms and reporting the details to ASIC and licensees. It is a commonly held view that the life insurers know who is churning, so let’s make sure they make this information available;
- Greater support for advisers to meet their product replacement obligations;
- Better enabling and more efficient production of advice on upgrading or modification to an existing policy, so that product replacement may not be required;
- Enhanced reference checking procedures to reduce the risk of advisers doing the wrong thing, quickly moving to another licensee; and
- Public reporting of claims payment outcomes and lapse rates across the retail, group and direct channels.
These measures have been included in a submission made by the AFA to the parliamentary joint committee on corporations and financial services inquiry into life insurance.
Better late than never I guess, but the AFA (and FPA) should have been calling out this nonsense from ASIC 3 years ago. ASIC have used a targeted investigation aimed at those suspected of churning (which we find out 3 years later is likely to be less than 50 advisers, or 0.3% of the adviser population) to publicly shame the entire adviser community, harm our reputation and lobby politicians for draconian changes to the law. If financial planners mislead the public in the way that ASIC has with Report 413, we would be banned for life. ASIC are still trying to damage our reputation with this report on the Money Smart website. Look at the section on life insurance. This is utterly disgraceful behaviour from a regulator.