AFA calls for “robust data” on insurance restructure

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.”