Asteron Life offers solution for broker conflict of interest

by Kelly Gregor03 Apr 2018

Asteron Life has welcomed the FMA’s report into churn practices in life insurance, stating it’s committed to sustainable and affordable cover for their customers, and encourages advisers to move to hybrid models with lower up-front commissions and higher renewals.

An Asteron Life spokesperson told Insurance Business they believes hybrid models lead to better support and services, and improved customer outcomes. Over the past few years, close to 50% of Asteron Life’s business has been written on these types of commissions.

“We welcome any work to improve customer outcomes in the personal insurance space, and take seriously the FMA’s findings that a small number of advisers may be acting against customers’ best interests,” an Asteron Life spokesperson told Insurance Business.

“Advisers play an important role in providing New Zealanders access to personalised financial and insurance advice, and we rely on advisers to work with us to put customers’ needs and interests at the forefront of what they do.

“The majority of advisers are committed to providing support, understanding and guidance that enables their clients to manage through some of the most challenging of personal circumstances,” the spokesperson added.

The comments come in the wake of the Financial Market Authority’s (FMA) report into Life insurance replacement business where it censored four registered financial advisers (RFAs) by issuing warnings for breaching obligations under the Financial Advisers Act (FAA) of care, diligence and skill. Several more were investigated and the FMA said it would continue to “keep an eye” on them.

The FMA concluded in their report that high up-front commissions and strong soft dollar incentives such as offshore trips were influencing advisers’ behaviour and causing a conflict of interest, which was leading to poor customer outcomes.

In February, Asteron Life executive general manager of distribution Cris Knell said the insurer welcomed any discussion on adviser remuneration when questioned about their offshore trip to Dubai and Morocco this year for qualifying advisers and their partners – the insurer declined to confirm the headcount and cost of the trip, Insurance Business believes it to be in the hundreds of thousands of dollars.

Partners Life, Sovereign and Fidelity Life also all declined to disclose the headcount and cost of their trips, which are to Hawaii, Greece, Fiji and New York respectively.

Knell said at the time, while the insurer supported “reasonable compensation and recognition for advisers”, but they were also committed to sustainable and affordable life insurance for their customers.

The FMA announced in the report that it would be looking into insurers – also known as Qualifying Financial Entities, which include banks that white label insurers’ products – to determine their responsibility to sustainable insurance practices and to ensure the customer interests are placed ahead of insurer and adviser interests.

Partners Life chief executive Naomi Ballantyne said that poor customer outcomes were the fault of advisers’ morals and were not caused by high commission and incentive structures designed by insurers such as Partners Life.

This claim was strongly rejected by the FMA who said it was disappointing to see insurers’ continue to shirk their responsibility when their report, and data included in the report, clearly indicated that certain advisers weren’t only influenced by commissions and soft dollars incentives but didn’t even recognise the practice as a conflict of interest.

 
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COMMENTS

  • by Paul 3/04/2018 2:27:16 p.m.

    while the focus is on inappropriate replacement business and adviser behavior, the discussion could be extended to when advisers do not replace business when in fact they should do , due to the inability of what constitutes good client outcomes and pressure that could be exerted by various entities , it feels like all replacement business is now tarred as inappropriate. it would be useful to hear positive stories, where existing policies have been replaced and a successful claim has eventuated , whether or not that claim would have been covered by the original insurer. Equally useful is to hear from Advisers who have not routinely replaced business and they also have had positive claims outcomes .
    start a positive news revolution .

  • by Rodders 3/04/2018 3:07:41 p.m.

    If you take in account the ratings described in QPR Researchers ratings, or IRESS or any of the rating houses, then replacing most banks insurance with mainstream insurance has improved customer outcomes by virtue of the likelihood of getting a claim, and probably an introduction to being underwritten. Is the converse true?, in which case I welcome the FMA review into banking insurance sales practice. Should be interesting to see if they exercise the same rigour, although I have a feeling it will all be "training deficiencies" to blame, and not the banks KPIs and incentives, whether they be performance based or whatever. Perhaps they might ask the question of how much money did banks make out of insurance sales???

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