Insurance boss blames morality for breaches
Claims by insurance firm Partners Life that it is insurance advisers’ morals, not sales incentives, that drive poor behaviour have been rejected by the Financial Markets Authority (FMA).
The FMA last week released a report into insurance adviser behaviour, looking at whether they were replacing their clients’ policies unnecessarily so as to maximise commission payments.
The report found half of the 24 advisers reviewed were not aware of their obligation to act with care, diligence and skill, or were in breach of it.
The FMA said it was worried advisers were chasing commissions of up to 230 per cent of a policy’s first year premiums and perks such as overseas trips.
Many advisers also failed to recognise that there was a conflict of interest.
The FMA called for insurance companies to consider whether their model of ‘‘unusually high’’ upfront commissions was the right one, and whether there was a better alternative.
Partners Life managing director Naomi Ballantyne said the vast majority of advisers took their obligations to clients seriously. But she said it was not the incentives that were to blame.
‘‘By drawing a conclusion that it is commissions and incentives rather than individual morals that drives poor behaviours … and given such a small number of advisers having been identified as behaving poorly, the FMA risks generating consumer distrust.’’
She said she expected the FMA’s next study, of salespeople, to show similar problems even though it would involve different remuneration models.
But FMA chief executive Rob Everett said the link between incentives and clients’ policies being replaced was clear.
He said there was no evidence the advisers looked at were taking their obligations seriously.
Though the 24 advisers were not a representative sample, Everett said the findings offered the FMA no comfort.
‘‘Insurance providers cannot shirk responsibility for the behaviour of advisers that is a direct result of the incentives designed by those same providers,’’ he said.
‘‘We have been raising these issues since 2015 and we’re disappointed to see signs that the industry continues to disregard the interests of the New Zealand public and consumers.’’