An insurance broker has applauded AMP’s decision to scrap its offshore incentive programme for financial advisers from next year calling the move “bold”.
“It’ll be great to see a change that better suits customers that keep advisers and insurance companies in business,” the broker said. “However, although being first to make a move towards positive change is commendable, it’s usually the first person or organisation that follows that will ignite a complete revolution of an industry.
“I’m looking forward to seeing which insurer is brave enough to take that step – if any.”
However, another broker called AMP’s decision “token” and said the Financial Markets Authority (FMA) had not done enough to identify the “churners”.
This comment was in reference to the FMA’s report into life replacement business where the regulator found that offshore incentives were influencing advisers which could, and in some cases did, result in poor customer outcomes.
“I have reported advisers who churn to the FMA who do not act,” the broker said. “They say the client has to complain but, in reality, the client is embarrassed that they have made the decision to change and they don’t want to complain.
“The industry knows who the churners are, so do the insurance companies. If the insurance companies really want to promote change they need to withdraw agencies from advisers that churn.
“This current statement from AMP is just a token gesture and will not fix the problem, and saves AMP money on the trips - premiums will not reduce as a result of the withdrawal of trips, only AMP will benefit through increased profit.
“There is a serious problem with churned policies which only becomes apparent many years later if the client needs to claim. At that stage the adviser has probably retired, left the industry and the client will not remember the conversations that were had 10 years prior.”
FMA chief executive Rob Everett welcomed AMP’s news, stating it showed a part of the industry was stepping up to focus its efforts on improving outcomes for consumers, and removing the potential for conflicted conduct connected with overseas trips.
“We are completing a report into our review of the structure of soft commissions and incentives offered by insurance providers for publication next month,” he said.
“Further to that work, as we signalled in our Annual Corporate Plan, we have commenced a thematic review of insurance replacement business practices at qualifying financial entities (QFEs) and an upcoming review of bank incentive structures that we will report on later this year.”
