AFA AUSTRALIA: FIX CHURN WITH WATCH LIST
[ Source: The Financial Standard, 16 July 2012 ]
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.