Financial Services Council launches investigation into churn
Financial Services Council launches its own investigation into churn
By Suze Metherell
July
24 (BusinessDesk) - The Financial Services Council, the
industry-led lobby group, has commissioned a report into
sales incentives in the personal insurance industry
following concerns about unnecessary policy switching.
The Auckland-based group has hired consulting actuaries Melville Jessup Weaver to investigate industry "churn", where a policy is switched to the benefit of a salesperson but not the customer, some of whom may even lose coverage for a pre-existing condition, FSC said in a statement. The report will "suggest remedies for any misalignment of incentives between salespeople and their clients".
"The products the industry sells address
issues like premature death and unexpected serious illness
that prevents earning and income, issues that most people
would prefer not to talk about," FSC chief executive Peter
Neilson said. "As those products are sold not bought, the
industry mainly relies on an agency and broker distribution
channel."
MJW will be advised by John Trowbridge, a
former member of the Australian Prudential Regulation
Authority who chaired an independent report into the life
sector across the Tasman. Trowbridge has been calling for
reform of Australia's life insurance sector and, in
particular, the adviser's commission on products sold, but
has said sector reform must be wider than a single focus.
The New Zealand industry-based investigation comes
after the Financial Markets Authority requested information
under Section 25 of the FMA Act from the main life insurance
providers. The data spanning a four-year period relates to
life insurance including total and permanent disability
insurance and income protection. The request included
premiums and policies sold and cancelled and commissions
paid by providers, spokesman Andrew Park said.
"Our
review is still in very early stages," Park said in an
emailed statement. “The FMA welcomes the focus the
industry is placing on discovering more about the issue."
The market watchdog identified the sales and advice practices around life insurance as a key focus area in its Strategic Risk Outlook in December.
(BusinessDesk)