AMP general manager Investments and Insurance, Therese Singleton, says there is no reliable industry data on what is happening and this enquiry may help However she reiterates the view that a quantatitive analysis of data may not provide clear answers to the question of whether there is churn as it doesn't address why each policyholder made the descision to switch.
"I don't know how big the problem is," she says.
One thing which may come out of the investigation is that the FMA may identify some advisers who have shifted books of business. Whether the FMA is able to investigate this further is unknown.
Singleton says "most advisers are sick and tired of being tarred with the churn label" and sorting out the issue is a good idea.
She says AMP advisers all sit within a QFE structure and have to give full advice to clients and they don't churn business. However half of the life insurance the company writes comes from other RFAs, most of whom were formerly associated with AXA.
"We don't have visibility of the advice these guys give to customers."
While AMP says its QFE advisers don't churn business, and it is unclear if there is an industry problem, Singleton says there are clear indicators other firms are winning business from AMP and there are "higher customer loss rates than before."
She didn't specifiy how much bigger these loss rates were.
However, it is unclear if policyholders were being disadvantaged by any churn or replacement business. On face value there doesn't appear to be a customer problem. She says there are no stories appearing of "customers being victims of churn."
That doesn't mean to say the FMA shouldn't look at the issue. There is a perception of conflicts of interest because upfront commission levels are so high, and higher than most countries around the wor;d.
More importantly the industry doesn't want to find a problem in 20 years time when policyholders come to make a claim and are denied.
She says there is no way to know what would happen to premiums if the level of churn was reduced. Premium setting is a complex process with many variables, including commission.
« FMA starts major investigation into churn | Churn debate: Don't follow Australia Jennings warns » |
Special Offers
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved
I just did a quick sample of AMP’s main product lines in QuoteMonster.
$300,000 life cover on a non-smoking male aged 38
(Most expensive of the non-banks and lowest quality score)
$300,000 life & trauma on a non-smoking male aged 38
(Most expensive of the non-banks and lowest quality score – 14% more expensive than the best product in the market)
$50,000 income cover (4 week wait, to 65, indemnity) on a 38 year old self employed skilled blue collar worker.
(Most expensive of the non-banks and the lowest quality score – 27% more expensive than the best product in the market and a ‘remarkable’ 2½ stars for quality)
Therese Singleton alludes to the "higher customer loss rates than before" and that other firms are winning business from AMP. I suppose, by this article, she would have us believe that this is, in part, because of churn?
The definition of ‘churn’ is moving cover to another provider for little or no benefit for anyone other than the adviser.
Therese is right. AMP advisers don’t usually churn their clients. I would assume they are doing the job they are legislatively bound to do – review their clients regularly and meet their needs with the best solutions available.
It will be interesting to see if the FMA concludes that churn is the cause of AMP’s problems?