Churn debate on hold
as FSC plays for time

Professional Planner Insurance Series – Part 1

The life insurance industry’s capacity for self-regulation will face a stern test over the coming months as the Financial Services Council (FSC) ponders its next move amid mounting opposition to its vision for the sector.

While the FSC has watered down the initial measures proposed in a Replacement Business Framework consultation paper, it must continue to strive for balance.

Keeping the medicine strong will only serve to alienate financial advisers, non-institutionally owned licensees and some life companies; diluting it further will lead government and regulatory bodies to question whether the FSC has the stomach for self-regulation. Of course it doesn’t help the debate that nobody is prepared to name the illness. 

The need for a policy rethink in the insurance sector is inextricably linked to the Future of Financial Advice (FoFA) legislation; and indeed, it was upon the release of FoFA in its draft form on August 29 last year that government committed to working with the industry to address “sales and remuneration practices within life insurance”.

Specifically, the Minister for Financial Services and Superannuation, Bill Shorten, stated: “A claw-back provision enables life insurance companies to recover some or all of the commission paid if a policy turns over early. The government will work with industry and consumer groups to introduce uniform ‘claw- back’ provisions to remove the incentive for some advisers to shop around for the most generous claw- back arrangements.”

To download a full PDF version of this feature, please CLICK HERE

To read Part II of this series, CLICK HERE