In August 2017, ASIC deputy chair Peter Kell admitted that the number of advisers engaged in the churning of life insurance policies may be relatively low. In fact, as few as 50 advisers out of 20,000 may engage in risk advice churn.
This admission came about due to the insurance company members of the FSC providing ASIC with full market lapse data. A very different situation to the review of a mere 202 files from “a targeted surveillance of advisers who give personal advice” (ASIC’s own words in report 413). Unfortunately, for many of us engaged in risk advice this admission came about after the LIF was passed.
For most of us engaged in risk advice, we didn’t churn clients because we had no need to unless there were very exceptional circumstances.
We had no need to churn clients for two reasons:
However, since the LIF was passed we find ourselves in an impossible situation and we need help, guidance and some answers.
Since 2017 and after LIF was passed, the same FSC member insurance companies have all been increasing premiums at unprecedented levels for existing customers.
As much as a 15 per cent per premium increase and in some cases as many as three or four separate increases since 2017. I have some clients who have seen their premiums increase by as much as 50 per cent over the space of two years.
This, as we have been informed by the insurance companies, is because of “high claims experience”.
However, the same companies have all been reducing premiums for new customers by as much as 25 per cent for the same products.
I now find myself in a very different situation to the one I was in before the LIF was passed.
Nearly every annual review I do I find that premium rates (new business premium rates) with other companies can be as much as 25 per cent cheaper for my customers. Worse, if I were to “churn” these customers to the very same insurance companies they are already with, the premium rates could also be as much as 25 per cent cheaper (same customers, same occupations, same products).
My questions to FSC CEO Sally Loane:
My questions to ASIC chair James Shipton:
This is very wrong. I believe the insurance companies are effectively robbing existing customers to pay for their new business targets and encouraging churn with this practice.
Anonymous Adviser, on behalf of all risk advisers and risk customers
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