Industry scoffs at example life insurance SOA
Responses from many within the risk advice industry to ASIC’s call for feedback on its example risk insurance statement of advice suggest it is something clients will unlikely read through or understand.
ASIC last week released Consultation Paper 284 (CP 284), Example Statement of Advice for life insurance: Update to RG 90, seeking feedback on the new example SOA and related updates to the guidance in Regulatory Guide 90 (RG 90), Example Statement of Advice: Scaled advice for a new client.
In a LinkedIn post, founder of Clique Paraplanning, Nick Topham, called ASIC’s example life insurance SOA “disgraceful”.
“[ASIC’s] attempt to create a clear and concise risk SOA has resulted in a document that is longer than almost all other licensee templates being used at the moment and is so packed full of dense text it borders on unreadable,” Mr Topham said.
“No innovation, poor layout and generally little to no thought put into displaying the recommendations in a readable way. But hey, commissions are on the front page so I guess that’s what matters.”
Advisers have also taken to the comments section on Risk Adviser and sister publication ifa, with some saying the example SOA requires 27 pages for basic insurance advice without including investments and superannuation.
“Anything more than five to six pages will not be read by the vast majority of our clients. To call the document ‘clear and concise’ is an insult to anyone who reads Consultation Paper 284,” one commenter said.
Another said they thought “sub-10 pages would have been a reasonable place to start”.
Others took issue with the requirement that commissions need to be disclosed on page one of the SOA.
One commenter said, “it certainly paints us as product sellers, not advice providers with the commission disclosure on the front in addition to the usual location”, while another said “the writing is on the wall that life companies and regulators want risk commissions gone”.
However, one disagreed that the example SOA is too long, saying risk advice is complex, especially with income protection contracts where definitions vary significantly across different contracts and providers.
“Throw in a comparison between an existing and newly recommended policy, and the additional layer of rules and advice if any of it is in super, and it’s pretty easy to get to 27 pages,” the commenter said.
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