The Association of Financial Advisers (AFA) will support most of the measures proposed by the Financial Services Council’s (FSC) revised life insurance framework but cautions that the devil remains in the detail.
The FSC last week softened its efforts at self-regulation in the face of industry concerns, but much is still open for debate ahead of the July 1, 2013 start date.
Richard Klipin, chief executive of the AFA, predicts the coming months will test the FSC’s leadership and resolve in securing a sustainable insurance industry for all stakeholders.
“The FSC’s new framework is a solid first step in the right direction,” he said.
“However, there is much devil in the detail to now finalise and negotiate.”
Lapses and innovation
Klipin added that decisions which change the way advisers currently operate need to be founded on “solid, robust data”.
Key concerns for the AFA remain adviser remuneration and claw-backs, and the association has proposed a range of alternatives.
“When managing risk through insurance, clients will take a long-term view, thus an expectation of a policy remaining in force for at least three years is reasonable,” the AFA said in a statement.
“However, there are two things that may impact this: change in client circumstances leading to lapses – the punitive impact of this on advisers needs to addressed; and innovation/better products – there are important implications for advisers who will need to comply with the best interests duty through this process.”
The AFA also proposes that where hybrid commission is chosen, a one-year responsibility period is appropriate.
Easier access
Klipin believes the life insurance industry needs to make it easier to access its products and services, especially as technological enhancements and automatic upgrades are now widely available.
“We need to be assured that any change to the life insurance industry results in consumers having continued access to high quality advice about their life insurance needs at an affordable price and for advisers to be able to continue to act in the best interests of their clients,” he said.
“We look forward to working with the FSC in the next phase of this process.”
What a disgrace to think that a group called the “Financial Services Council” who holds itself out to be a representative of our industry, gets the opportunity to influence policy on the life insurance industry. They are no more than a self interest group of executives from the major life companies, pushing their own barrow.
Their latest diatribe regarding the 3 year responsibility period, does nothing to fix the major issue in our industry, which is under insurance. It does however show very clearly there modus operandi, which does nothing to benefit the consumer, BUT surprise, surprise, benefits the product manufacturer.
I dont believe that the 3 year responsability period will have any affect on the affordability of life insurance inparticular the underinsurance problem.
There are many ways that the individual can get cheap premiums at the moment,the problem is perception has it they do not need it and do not understan it.