Clawbacks: Synchron rallies against FSC's ‘anti-competitive’ policy

There is nothing necessarily wrong with finding a better policy (say within the first 3 years) but I can't find any legislation which requires an adviser to take the 115% upfront again should one policy be replaced with another. Remember the trail is supposed to pay for the review. If reviewing every 2-3 years and you find something materially more appropriate you've received trail each year which collectively should cover the cost of the new piece of advice....taking the upfront again in full is not a primary motivator but it's a nice secondary benefit! I also agree with you Jeff, it is a replacement policy it should be disclosed in the app.

Pat just because very few people are actively advised to change these items does not mean that the word "churning" is a furphy made up by insurers with their profits in mind?

Andrew: the difference being is that very few people are actively advised to change their phone, car, house.

I read with interest Don's article in Money management and note that "While a Money Management forum last month found churning was not as widespread as many industry critics suggested, the Australian Securities and Investments Commission (ASIC) said its work had identified it as a real problem and supported the FSC's proposal."
It is time that ASIC if it does have facts (which no one else seems to have on churning), why don't they present the facts so that we can all become aware of where the problem lies.
At present it is all supposition. John Brogden at the seminar in Sydney some months ago on the subject had no facts to back up his beliefs and neither do the insurance companies that I have asked.
If a policy is to be replaced, there is a box in the Application that asks if it is a replacement application. Does any one in the insurance companies ever look at this or ask why? Could be a source of real facts.
It all looks like shooting from the hip and ask questions and gather information later.
Maybe we should be asking ASIC to present their facts (if they have any).

When one upgrades their phone, their car, their house, etc. it is known as a purchase. In most occasions this would be done for a myriad of reasons including getting newer technology, lifestyle changes, saving money, etc. When the same person upgrades their life insurance policy it is called churning...! This phrase was coined many years ago by insurance company execs and has no relevance today (except to their shareholder driven profits). Best duty demands advisers have open architecture to work with and introducing 3 year clawbacks is anti competitive so Don we are with you!

Level Commissions! Take away the large upfront conflicted incentive and use the incentive to service the client over the longer term for fair renummeration.

The answer to "churning" is quite simple.
The Life companies have an obligation to accept or reject recycled business.
If we are talking about policies lapsing then the reasons why beyond a 12 months clawback period should be explained
If the FSC or ASIC can prove that an adviser has consistently not acted in the best interests of the client then take action against the adviser and the life companies involved.
There are a mulitude of reasons why some policies lapse. Usually chnged employment/unemployment, marriage/divorce, increased/decreased liabilities, ....pick one.
As for churning well the need to replace any life policy needs to be justified.
Make that a statutory obligation on all parties involved and perhaps you might just get a rationalisaion of the proper processes.
There are 3 parties involved in the tranaction with the client in the middle.

Thank you for once again voicing the obvious Don. It's shameful that all other Licensees & Institutions who can't see the wood for the trees are not openly opposing what amounts to yet another restraint of business on this industry.

The FSC does not fully understand what the exact definition of churning is and until the reasons why policies lapse is clearly defined, it is premature to make decisions that will impact all stakeholders.

The solution is simple.

Ask clients why they let their policies lapse. After all,it requires the clients signature to do it,so you would assume they would know why.
The technology is being used to track policies,though the wrong questions are being asked as to why clients lapse their Insurance.
Any information is only accurate if the data is correctly collated in the first place.

Perhaps the life insurers could waive these proposed three year claw backs for individual advisers with proven persistency records by simply segmenting advisers in a similar manner to what many advisers have been doing with their clients for many years now?