AFA AUS­TRALIA: FIX CHURN WITH WATCH LIST

[ Source: The Fi­nan­cial Stan­dard, 16 July 2012 ]

Insurance - - INDUSTRY UPDATES -

The As­so­ci­a­tion of Fi­nan­cial Ad­vis­ers (AFA) pointed out that “churn” should be han­dled by in­sur­ers shar­ing in­for­ma­tion to cre­ate an in­dus­try watch list that would iden­tify ad­vis­ers par­tic­i­pat­ing in the prac­tice. The AFA pro­posal was in re­sponse to the re­cent Fi­nan­cial Ser­vices Coun­cil’s (FSC) call for a crack­down on “churn­ing.” The watch list will ex­tend as far as it is al­low­able un­der pri­vacy leg­is­la­tion with in­sur­ers per­mit­ted to share in­for­ma­tion to es­tab­lish who the churners are and cre­ate the list ac­ces­si­ble to stake­hold­ers. The FSC Con­sul­ta­tion Pa­per on Re­place­ment Busi­ness Frame­work sparked de­bate over how the prac­tice of “churn­ing” should be man­aged. In a re­cent sur­vey con­ducted by As­teron Life, in­de­pen­dent fi­nan­cial plan­ners be­lieved dealer groups and life in­surance com­pa­nies should man­age the is­sue. The AFA has said that pub­lic in­for­ma­tion is a bet­ter ap­proach to its erad­i­ca­tion. The AFA's submission on churn­ing also sug­gests life in­surance ap­pli­ca­tion forms be amended to in­clude a dec­la­ra­tion from the ad­viser that a re­place­ment pol­icy rep­re­sents a net and ma­te­rial ben­e­fit for the client. This would put the onus on life com­pa­nies to

re­quire ev­i­dence of such a ben­e­fit in cases iden­ti­fied as likely to fall into a churn pat­tern.

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