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Adviser warns of insurer clawback loophole

A fundamental problem exists surrounding clawbacks from insurance companies when it comes to planners taking over servicing rights of clients, according to a dealer group managing director.

MyPlanner managing director Philippa Sheehan criticised current agreements from the majority of insurance companies where the adviser who takes over servicing rights of a client is clawed back for cancelling their policy, even though the client’s previous adviser received the commission for the writing of the policy.

Ms Sheehan told Risk Adviser she confronted one insurance company about this issue and their response was that no adviser should take over servicing rights until they have the information on the client’s policy.

“Their recommendation was for planners to have the client sign two authorities – one for information on the policy and the second for when we have the information to then take over the servicing rights,” she said.

“In an industry that already has too much paper work, insurance companies are now recommending more paper work and more systems.

“Surely, you can take over the servicing of a client to see that what they have set up is appropriate or not, and not be penalised for doing the right thing.”


Ms Sheehan said that such a situation arises when the adviser has to act on best interests duty.

“I have no issues with planners receiving commission for insurance if that is what their business model is. The life insurance reforms are not going to change planners wanting to charge commissions if they see fit,” she said.

“Insurance companies, I encourage you to take the lead and tidy up your agreements for the sake of good planners who are trying to do the right thing by the client and are being penalised.”

Adviser warns of insurer clawback loophole
Philippa Sheehan
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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