The proposed Life Insurance Framework (LIF) will not stop members of the risk insurance advice industry 'churning' clients into new policies, according to a survey conducted by Risk Adviser.
Eighty-seven per cent of 352 respondents said that the LIF would not stop advisers churning.
Despite this result, ClearView managing director Simon Swanson, when asked whether he believed the life insurance reforms would improve the quality of advice and curb the number of churners in the industry, said there is not a lot of churning going on for the reforms to stop.
Mr Swanson said what was actually happening was advisers were "quite appropriately" moving clients into new policies on a regular basis due to life offices making substantial increases to policy premiums.
Clients were being faced with increases of "close to 20 and 30 per cent" to their premiums and complaining to their adviser about the cost, Mr Swanson said.
As a result, the client's adviser went and found them a cheaper policy.
“That is not churning in my view. Churning is when a customer is moved from one product to another where the policy is inferior or the premiums are inferior,” he said.
Mr Swanson added that the biggest issue for the industry in terms of poor quality advice actually comes from a culture which has “permeated through very narrow approved product lists [APLs]”.
“Our view is, if you are vertically integrated it should be a requirement that you have every life insurer on your APL, [there should be] also the removal of volume bonuses, and shelf-based fees which clearly compromise advice,” he said.
“A part of this is at the dealer group level, of course, not at the adviser level and people forget that as well.”
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