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CPD problems for insurance advisers

Changes to CPD training requirements create problems for insurance companies and advisers. Russell Hutchinson explains why.

Monday, December 23rd 2013, 6:12AM 4 Comments

by Russell Hutchinson

Whether you are an RFA or an AFA you have an obligation under the law to be competent to offer the advice you do.

Let’s assume you were 100% competent on January 1, 2013. All was well.

Now consider all the changes that happened during the year – there were at least 28 life and personal lines insurance products affected by changes. Some providers updated documents for every product in their range.

It is true that some of the changes were minor, but many were not.

In fact 2013 was notable for the number of revisions to heart-disease and cancer definitions in Trauma, for example, by several large providers of popular products. Sovereign’s introduction of severity-based trauma is the most significant example – a completely new product.

Substantial changes to income protection policies, business policies, and TPD also occurred. I am not even including pricing and regulatory updates.

If you offer advice on these products you would need to keep up to date with what is happening.

If you don’t then you could be accused on not acting with reasonable care, diligence and skill.

That applies as much to products that you choose not to recommend as those you do, if you express an opinion on them. So for example, if you recommend that clients do not buy severity-based trauma you are still expressing an opinion on it.

So you need to have competence. You could demonstrate this with your own efforts: read up a lot, network with advisers in Australia that have had similar products for several years, and so on. It is just harder to prove should there be an issue that you are competent than by pointing to a schedule of training over the year from third-party providers.

Of course the problem is that there isn’t much training specific to these products.

The bigger problem is that there is about to be a lot less.

Insurers themselves are the ones most interested in their products and they like to run training sessions.

RFAs have no specific continuing professional development requirements except as members of a professional body. But they are still bound by the requirement to have reasonable care, diligence, and skill.

A good guide to what is reasonable is the AFA code requirements for continuing professional development. The new, proposed, requirements would make training offered by the insurer no longer count because it isn’t sufficiently independent.

Advisers who want to meet these professional standards will have to ask themselves: how am I going to get 15 structured hours of training on insurance products?

For insurers launching innovative new products they will in future have to consider how they can get someone else to offer training on those products. Otherwise no competence means no advice, which means no sales.

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Comments from our readers

On 23 December 2013 at 9:01 am Amused said:
“That applies as much to products that you choose not to recommend as those you do, if you express an opinion on them. So for example, if you recommend that clients do not buy severity-based trauma you are still expressing an opinion on it.”

Advisers DO regularly express opinions to our clients when we recommend (or not recommend) a particular insurer and their products. Such opinions are based on our own experience of dealing with various insurance companies at claim time for our clients. Advisers also talk regularly amongst themselves as each of us has had our own different claim scenarios for clients. This is one of the things I like most about the insurance adviser community. We all have so much experience in handling claims each year that ultimately that knowledge will benefit someone else’s client potentially one day.

If as advisers we have to worry now about expressing an “opinion” for our clients NOT to take an inferior insurance product e.g. income protection policy paying in arrears vs. advance then we have truly reached insanity. I’m not going to sit in front of my clients and worry about my expressing an opinion on why they shouldn’t be with a particular insurer/s that still insists on paying its disability benefits to policy holders in arrears. I know from first-hand experience of a big loss of income claim for a client the clear financial benefit of them NOT been on an arrears type paying policy.

There continues to be a lot of scaremongering within the compliance industry about what advisers should be saying and doing when discussing insurance with our clients. Personally I am not losing any sleep over the fact that I regularly tell my clients certain insurer’s products are clearly inferior to others. Because they clearly are!

Please! A bit of common sense on this subject.
On 23 December 2013 at 12:23 pm Steve Wright said:
As I understand the draft of the Code revision sent to the FMA, Insurers can still offer training on their products and that training can be structured training.

However, "training provided for the principal purpose of promoting a particular financial product" does not qualify as structured. (I am led to believe that this means "product launches" and not the technicalities of the product.)In my view this exclusion is unfortunate due to its broad nature and it is potentially completely counter productive as far as educating Life insurance advisers goes if it is not narrowed down only to the Insurance Company promotion bits that don't educate the adviser about the product or its uses and benefits to clients. Product launches typically come with training on the technicalities of the product and why these are of value to clients. Advisers need this product detail and cannot comply with their duties without it. It would be absurd if this information, critical to proper advice, could not be "structured".

Sadly this point seems to have been misunderstood by the Code Committee. I hope the FMA don't miss the opportunity to clarify it.
On 23 December 2013 at 3:12 pm Amused said:
Well said Steve. I have to say from my perspective as an adviser that things seem to be "purposefully" getting more and more complicated around this issue of what now passes as structured training. The Code Committee should be focusing on providing clarity to advisers not making things even more cumbersome. Again common sense doesn’t seem to feature in the decision making process.
On 24 December 2013 at 9:20 am David Whyte said:
Appears to me that the CPD provisions have been developed with Investment AFAs in mind. The aspect of continuing education for Risk AFAs should be addressed separately, with specific areas of competency addressed, as was originally intended before the 'voluntary' option for Category 2 products arrived. If a Product Launch only contained advertising hype and marketing BS, I believe that few advisers would attend. Without the technical content, the launch would be a waste of time and money. I agree with Steve that some common sense needs to be applied by the Code Committee.

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