While the Association of Financial Advisers (AFA) and dealer group Synchron have welcomed the Financial Services Council's (FSC's) decision to abandon seeking approval for its 'churning' policy, they stressed advisers now need to focus on the issue of underinsurance.
"What it means right now [for advisers] is that we need to continue getting out there and solving the [issue of] over a trillion dollars of underinsurance in the marketplace," AFA chief executive Brad Fox told InvestorDaily. "So it's time to get active.
"We are glad that the conversations we engaged in with the FSC through the second half of last year have led to this result. However, we also recognise the issue of insurance is still on the table as one that we need to continue working with the FSC to resolve," he said.
Mr Fox explained that given the financial results posted by the insurers on their income protection books, there will need to be further discussions about sustainability.
"We asked last year for the research or the evidence to show where the issues were coming from, and we'd still like to see that as a starting point so we can collectively help to work on the issue," he said.
Synchron's director Don Trapnell said the FSC announcement has highlighted that insurance companies are conscious of lapses and the potential for churning.
"The only challenge is labelling insurance providers as the bad boys of the industry - they're just doing their job and doing it properly too," Mr Trapnell said.
In an industry driven by statistics and common sense, the FSC's policy simply did not stack up, he added.
"The FSC in particular and the life insurance industry in general simply could not provide the statistical evidence that supported that a systemic culture of 'churning' exists amongst advisers. Synchron is very proud to have rallied in defence of advisers and led the debate challenging the FSC's view of the world," Mr Trapnell said.
On Thursday, the FSC's chief executive John Brogden said that while the council had determined to proceed with an application to the ACCC to approve the proposed FSC framework late last year, on the basis of consultation - with industry bodies, regulators, consumer groups and the government - the FSC "no longer [had] unanimity on this approach" and therefore had decided to not proceed.
"The proposed framework raised a complex set of factual, legal and economic issues from a competition perspective which meant that it would have required regulatory approval in order to be implemented. There was no guarantee that such approval would be obtained," he said at the time.
