FSCL warns financial advisers on disclosure

by NZ Adviser31 Oct 2016
Although complaints against insurance companies continue to top the proportion of its cases (32% in 2015/16), dispute resolution service Financial Services Complaints Limited (FSCL) says it is sales of replacement policies by independent financial advisers that it is concerned about. 

Its annual report released today revealed that a growing number of complaints stemmed from the sale of replacement life, trauma and health insurance by financial advisers.

Chief executive officer Susan Taylor said, “these complaints raise a question as to whether some financial advisers are acting in their client’s best interests, or their own,” although the total figures remain low (11 investigations in the last 12 months).

The FSCL report said it expects this to be an increasing trend and highlighted the Financial Market Authority’s current investigation into insurance ‘churn’.

“It is really important that consumers understand the potential risks of changing insurers, as the consequences of not being covered when you think you are can be disastrous,” said Taylor. 

The FSCL has called for financial advisers to provide their clients with a comprehensive written statement when advising on replacement insurance cover, to help avoid complaints.

According to the report, it recommends the statement to include: 
•    specific reasons for proposed replacement
•    key differences between the existing policy and the new recommended policy
•    the client’s duty of disclosure and the consequences of non-disclosure
•    clear and full disclosure of fees or commissions
•    how the replacement policy will be implemented.

FSCL’s annual report showed it processed 3,600 consumer enquiries and complaints regarding financial service providers to the end of June 2016, a 40% increase on the previous year, and formally investigated 178 cases, a 10% drop.

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