ASIC's Joanna Bird

The securities regulator has started gathering data and is laying the framework for a review to measure the quality of risk insurance advice in Australia, a senior ASIC executive has outlined.

ASIC has already issued three of the four notices it intends to issue to purveyors of risk advice and services as part of the data-gathering aspect of the review, Joanna Bird, ASIC’s executive director, wealth management, has said.

Once the data gathering is complete, ASIC will then kick off a surveillance project; ASIC’s risk advice surveillance project will be based on a random but representative sample of advice currently being given by risk advisers in this country, Bird said.

Bird’s outline of ASIC’s risk advice review plan is the most current insight into the regulator’s approach to assessing the effectiveness of the Life Insurance Framework reforms to date; it was explained during a round table in Parliament House in Canberra on Wednesday, hosted by AIA Australia, facilitated by Professional Planner and attended by the current financial services minister Senator Jane Hume and shadow minister and assistant shadow minister for financial services, Hon. Stephen Jones MP and Hon. Matt Thistlethwaite MP.

ASIC’s risk advice review, which Bird described during the discussion, was mandated when the Life Insurance Framework (LIF) changes were implemented in 2018. ASIC’s review has taken on greater significance following the Hayne royal commission when it was noted in the final report’s recommendations that the cap on commissions should ultimately be reduced to zero unless the review showed clear justification for retaining those commissions.

Insurance industry leaders believe LIF changes have levelled the paying field by removing the financial incentive for advisers to recommend one product or insurer over another, whereas before the LIF changes, insurers could set their own commission payments to risk advisers which led to conflicts.

“We agreed to do the review at the time the reforms were introduced and nothing really has changed,” Bird told the table, which also included a handful of risk advisers, life insurance company CEOs and heads of the Financial Services Council, Financial Planning Association and Association of Financial Advisers. Professional Planner will report more insights from this discussion in coming weeks and months leading up the its inaugural Risk Advice Summit.

“Our aim is to do an evidence based review and that will enable government to make an informed decision about what the policy will be,” Bird said.

In preparing for the surveillance project – which will commence at the start of 2021 – ASIC is gathering data now about the risk advice industry.

ASIC’s data capture includes gathering sales data, policy outcomes, premium differentials, commissions paid, data on policies that have lapsed and been clawed back.

“That’s part one of the review,” Bird highlighted.

The second part of the review will assess the quality of risk insurance advice and outcomes using results from surveillance, she said.

“We’ve always taken the point of view you can’t really tell if life insurance advice is in the interest of clients or not, which is why we are doing this review… the reason we are starting it in 2021 is we want to see whether the reforms have made a difference,” she said.

Bird estimated that the findings probably won’t be finalised or publish until 2022 given the size of the review.

One comment on “ASIC outlines surveillance plans for risk advice review”
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    and what knowledge will these “checkers” have of our industry – more public servants /more academics who haven’t spent a day interfacing with a client in a real world setting – how many clients really have received advice that is so consistently bad that justifies the systemized dismantling of the self employed risk adviser community and lets not mistake ticking /not ticking process boxes as good or bad advice

    – 50% reduction in earnings – insurers continue to put premiums up – clients not better off
    – suffocating irrelevant compliance that sees voluminous reports that clients do not read , that are impersonal and more about passing audits and minimizing litigation potential – clients not better off
    – one size fits all education requirements that demand risk only advisers to study and fund a curriculum that is illegal for us to give advice on and in breach of our pi insurance – clients don’t benefit and the industry will see the greatest outflow of knowledge and experience ever seen as a result of these hypocritical and misguided demands – 3,000 left so far this year and another 3 thousand predicted by the end of the year – 8 new entrants Im told – the ANZIIF already has a well respected and regarded long standing life diploma course – ? why is this not used for risk advisers –
    how much money are the training companies making out of this nonsense

    when the dust settles down lets watch the banks re enter financial services with the adviser force decimated

    lets remember

    – advisers don’t design product , set marketing strategies, set claim management philosophies , set brokerage payments – the institutions do – it was the institutions caned by the royal commission not the self employed adviser community

    bloody obscene and no one is standing up – not the institutions and – the professional bodies are gutless and focusing on the really important stuff like adviser of the year awards

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