ISI says AON letter is not a problem

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A letter from AON to insurance customers suggesting they should switch their cover to Sovereign has provoked accusations of churning from some advisers however the Investment Savings and Insurance Association (ISI) says it is not a problem.

Tuesday, September 7th 2010, 10:13PM 4 Comments

by Jenha White

The letter from AON sent in May, said the company would be contacting all of those clients who were not insured with one of its preferred insurers and reviewing their covers.

"We're writing to advise you that an agreement has already been reached between AON and Sovereign Assurance, which gives you the opportunity to transfer your insurance cover to Sovereign.

"As one of our new panel of providers, Sovereign is offering to transfer your cover on a like for like basis, without the need for any medical questions or examinations."

Scott Wilson from Asset Wise told Good Returns he was "disgusted at this blatant attempt at churn".

However the ISI says the letter is acceptable because firstly, it does not result in an automatic transfer of business and secondly because the client is taken through an appropriate review process to enable them to make a fully informed decision.

The ISI says it is a timely question because it emphasises the importance of having robust replacement business rules in place to ensure the best interests of the client are always put first.

The ISI says for every client who expresses an interest in such an offer, it would expect their adviser to sit down and undertake the full replacement business process with them.

It says this would ensure that transferring to a new provider is in the best interests of that client and that the client fully understands the consequences of making that change.

"AON have signalled that this is the intention of the letter," says the ISI.

It states if this were not the case and replacement business rules were not adhered to, then this would become an issue as the client may not be receiving the best possible advice for their personal situation.

AON refused to make a comment to Good Returns about the letter.

Sovereign said "we believe our involvement is entirely appropriate, above board and consistent with ISI policy".

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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