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AIA hands in FSC notice

The Financial Services Council's controversial report into life insurance has claimed another scalp with AIA joining Partners Life in resigning its membership.

Wednesday, November 11th 2015, 6:00AM 11 Comments

The FSC is funding a report by actuarial firm Melville Jessup Weaver into the issue for commission in New Zealand’s insurance industry.

The report is rumoured to have cost $500,000 and is proving divisive among FSC members for its view that commissions are too high.

That has riled insurers who use adviser channels.

Partners Life yesterday announced it was giving notice of its resignation – FSC now requires 12 months.

Today AIA has confirmed it has followed suit and it is believed other members will follow.

AIA chief executive Natalie Cameron said the MJW report was counterproductive and should not be published.

She said the present review of the Financial Advisers Act is welcome and it was important the FSC’s contribution to the debate was informative, constructive and balanced, goals she said the report failed to achieve.

“AIA supports reform of the Act, as we set out in our submission to the Ministry of Business, Innovation and Employment,” says Cameron. “Under-insurance is a major issue in New Zealand and the industry needs to work hard to eliminate impediments to families receiving coverage.”

But she said the FSC report was biased in its treatment of market participants, singling out financial advisers.

“Different distribution channels using different remuneration models are needed if we are to increase availability and affordability. For instance, the Council report could have singled out banks, whose employees are remunerated on a bonus structure or volume basis, a key conflict of interest risk highlighted by the Financial Markets Authority in its Strategic Risk Outlook. Banks also perform an important role in this market and have their challenges – for example the financial products and union Fintec has called for the sales targets for bank staff to be reduced – yet it is the advisers who have been singled out in the FSC report.”

Cameron said there was an important balancing act between protecting the consumer but at the same time not unduly restricting access to financial advice.

“It is vital that specialist sellers of insurance products remain in the market.  We believe that misdirected regulation has the potential to remove choice from the market – which would impede
access to insurance, not increase it,” she said.

“It is disappointing that the FSC has taken this stance, despite strong advocacy for the IFA market from a number of insurers,” comments Cameron.  “It does not represent the views of AIA. We feel we have no other option but to withdraw our membership of the FSC at this time.”

EARLIER STORY: Partners Life stands up for advisers

Tags: AIA FSC

« nib expands its distributionCommission regulation not likely: Goldsmith says »

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Comments from our readers

On 11 November 2015 at 8:00 am w k said:
wow, $500k for a report to say commission rate is too high? i like this kind of job. i suppose if mjw's commission (punt intended) had been $50k fsc would not have lost its members.
On 11 November 2015 at 10:40 am LPL said:
"I belong to an organisation that has commissioned a report that shows the way I do business is perhaps not the best model" - I'm leaving! Fair enough!

The Financial Services Council is an organisation that claims to be about growing and protecting the wealth of New Zealanders.

It seems the objective of the FSC and it's members is indeed different; no hand on - the members with different objectives are leaving!
On 11 November 2015 at 1:35 pm macca said:
Maybe the non-bank insurance companies can set up their own organisation, and call it, say, the Life Offices Association?
On 11 November 2015 at 3:07 pm Pragmatic said:
What if the report by MJW is correct? Those who are resigning from the FSC look pretty silly
On 11 November 2015 at 3:32 pm Teddy2Toes said:
The QFE's aka the big banks are trying to destroy the IFA channel. The FSC are helping them do so in putting their name to a shonky report.

Fully support those providers ditching the FSC!!!

Surely with those already gone this organisation is now just joke!
On 12 November 2015 at 12:10 pm I was wondering said:
With these significant resignations it's hard to believe that the FSC has a mandate to speak on behalf of anyone except the Banks?

Taking into account the above comments from AIA's Natalie Cameron, why is the Banks' Conflict of Interest challenges not being addressed?

Why single out Financial Advisers only?

Something stinks to high heaven here. I think that the FSC has been hijacked and certainly has no credibility in my eyes.
On 13 November 2015 at 12:42 pm Majella said:
@ LPL: there's a clear case of a psychopathy known as 'cognitive dissonance' in the FSC and your remark fails to recognise that, in fact, the FSC is NOT fulfilling its stated objectives in accepting this Report.

The Report is widely seen (by Naomi, Nadine & Natalie et al - heck, even Milton!) as being outside the original scope & brief given to MJW, (and if so, the FSC should not pay the invoice).

It's also recognised (by the same luminaries, and they've READ it!) that it's been perverted into an attack on the non-aligned broker channel.

As @'Teddy2Toes' & @'I was wondering' feel, I too wonder at the banks and their 'hi-jacking' of this Report to serve their own "Bigsurance" (esp ANZ) agenda: that is, to reduce the competition and peddle unadvised inferior products at inflated prices to uninformed and captive clients. Smells like hell.
On 18 November 2015 at 7:28 pm I was wondering said:
Agreed. If and when the FSC members do try and cut commission, remember those that left the FSC in support of independant advisers and those that chose to stay and tow the line.

They'll be wringing their hands and saying that they have no choice and it's not their fault but, THIS IS THEIR REPORT commissioned and paid for by the FSC. They can hardly claim that their stooges came up with something that they didn't expect.

I know who will get my business when the dust has settled!
On 19 November 2015 at 11:39 am Ron Flood said:
'I was wondering". I hope that when the dust settles you will be more concerened about the best benefits for your client's and not the level of commission you will receive or which organisation a provider belongs too.

After all, the Act requires us to act in our client's interest.
On 19 November 2015 at 1:34 pm ICSVortex said:
@Pragmatic, do you think those resigning from the FSC are making their decision without having seen the report?
On 19 November 2015 at 3:49 pm Pragmatic said:
@ICSVortex: no I'm not suggesting that. As I haven't seen the MJW report, I'm speculating that "what if the report was right"? It's always worth considering all sides, before passing judgement

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