ClearView slams APL standard

Listed financial advice firm ClearView criticised the Financial Services Council's life insurance approved product list draft standard as superficial and ineffectual, saying it will only allow sub-par practices to continue.

ClearView managing director Simon Swanson described the FSC draft standard as a "Yes Minister" document, confirming the industry could not self-regulate and would achieve nothing in terms of increasing competition, choice and customer best interest.

The draft does not provide clear guidance on how broad the range of insurance products should be and only mirrors the current situation where large institutionally-owned licensees can use discretion to enforce extremely narrow and restrictive APLs, Swanson said.

Swanson adds the draft standard ignores the issue of shelf-space fees and shuns the Trowbridge Report's recommendation that APLs should include at least half of all life insurers.

"Despite being charged by the government 18 months ago to develop a new APL standard for the delivery of greater product choice and accessibility for advisers, the FSC has produced a superficial document that will fail to stamp out anti-competitive practices by the large vertically-integrated institutions and therefore won't lead to profound, lasting change and a better deal for consumers," he said.

"Open APLs are essential if advisers are to provide objective advice in the client's best interest however the FSC's dependent relationship with the dominant, vertically-integrated players means that there will be no meaningful progress in the absence of regulatory action."

He added it was counterintuitive to ask advisers to be degree qualified, meet continuous professional development obligations and professional standards but dictate to them the products they can and can't recommend.

According to the APL draft report, when considering products for inclusion, the FSC will conduct a premium analysis on a range of product scenarios as a proxy to determine the competitiveness of an insurance product, which isn't necessarily based on the highest rated or cheapest.

Many life insurance companies will price products to attract or detract certain clients, which may relate to age, sex or occupation. Premium pricing will be more sensitive within certain demographics and accordingly, a product does not need to be competitively priced across all product scenarios to be included on the list, it says.

If a client has a specific need that's not covered by the list, the adviser should identify a suitable 'off' APL product subject to approval. The FSC also encourages licensees to develop and use a benchmark methodology in identifying which products are suitable for inclusion such as internal standards or research house ratings.

ClearView will petition the government for mandated open life insurance APLs for all AFS licensees and is preparing a formal submission in response to the FSC's draft standards.

Read more: FSCClearViewFinancial Services CouncilOpenPremiumAFSSimon SwansonTrowbridge ReportYes Minister
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