ASIC reveals conflicted pay at two insurers
The corporate regulator has revealed potentially conflicted incentive structures in place at two life insurers that relate to the number of claims that are declined.
Appearing before the House of Representatives Standing Committee on Economics this morning, ASIC senior executive leader Michael Saadat said two life insurers were found to be remunerating their staff using a “balance scorecard” that included incentives related to the number claims denied.
Mr Saadat declined to name the two insurers, saying ASIC received the information based on confidentiality.
He said, however, he did not expect these structures to continue.
“In the future, no insurer will have these kinds of incentive structures in their incentive plan. The life insurance code of conduct released on Tuesday... one of the elements of that code is that insurers are required to remove any incentives that relate to the number of claims declined,” he said.
“We expect that the two insurers that did have that issue will not have that issue going forward.”
Also during the inquiry, committee chair Liberal MP David Coleman asked ASIC where the rules stand in relation to banning managers in instances of adviser misconduct.
“It seems to me that there is an issue here where individuals, say financial planners, who are found to have breached rules are dealt with but senior management, who haven’t actually provided the advice, frankly seem to have not suffered substantial consequences,” Mr Coleman said.
ASIC chairman Greg Medcraft agreed, saying the issue was raised in the Financial Systems Inquiry report last year and that progress was being made.
“It’s often not just a problem with bad apples. It’s often a problem with the tree, so let’s deal with the tree. That is being addressed,” Mr Medcraft said.
Last week, ASIC released the findings of its industry-wide claims handling review, which was launched in response to the CommInsure scandal.
The review found that some insurers had substantially higher-than-average declined claims rates and a substantially higher-than-proportionate share of disputes about claims. One insurer, BT Financial Group, had a denied claim rate of 37 per cent on its total and permanent disability products, 19 percentage points above the average rate.
What is the value of an adviser?
A new report has dived into the value of advisers and found that they deliver va...
Expect industry overhaul: FPA
Financial planning is set to have a revamp, the Financial Planning Association o...
Industry needs to speak the language of women
The adviser industry still has work to do in finding a way to speak the language...