A life insurance consultant has warned that the deal between Commonwealth Bank of Australia and
AIA Group may prompt a surge in churn.
Advisers will benefit from a new way in which they can encourage their clients to change policies, it was suggested by Brian Klee, of Klee Consulting and Life-Info, in article at Interest.co.nz. This means that they could potentially receive high up-front commissions from the insurers their clients move to.
Klee told the publication that the issue presented an opportunity to approach clients and say: "Hey look, Asia’s largest independent publicly-listed life insurance group has just bought Sovereign. Your Sovereign policy holds, but this may be a good time to jump ship to AIA."
The Financial Markets Authority, New Zealand Institute of Economic Research and consultancy Melville Jessup Weaver are among those that have conducted studies in recent years highlighting the prevalence of churn, the report said.
In 2013, when Fidelity Life took over
Tower’s life insurance book, there were high rates of churn, Klee said. The same is likely to happen with CBA selling its life insurance business, which includes Sovereign and ASB’s life and health insurance book, to AIA, he said.
“With these mergers and takeovers, that’s the bad thing. If consumers are not getting proper advice, they could end up with a product that isn’t suitable for them,” he said. “That whole area of disclosure, when it comes to replacing policies, is going to rear its head, I suspect. …I don’t believe there’s enough in place to protect consumers.”
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