Barry Read
by Susan Edmunds
Barry Read
In June, the FMA revealed the first results of its investigation into churn.
It said 200 of the 1100 advisers it had identified with more than 100 active life policies on their books met the criteria for having high estimated rates of replacement business.
That criteria were that at least 12% of an adviser’s policies lapsed and the adviser wrote at least 12% of policies as new business within one year, or at least 40 lapsed in a month and the adviser wrote 40 new policies in the same month.
The FMA said it had signaled with that report that it would be doing more work with those advisers.
It is understood that has meant sending requests for information to the advisers. The information sought is similar to that requested from the insurers themselves in the first round of investigation – covering all new policies written in the past five years including policyholder details, adviser details and commission payments. It has asked advisers for information about policy lapses and renewals.
Barry Read, of compliance firm IDS, said he had been contacted by some of the advisers who had received the request, and wanted advice on what to do next.
The company has drawn up a template for them to use in their response, which would help them collate the data required.
It has also prepared documents asking the insurers to release the data for the individual adviser so that insurance companies and advisers did not have to go back and forth asking for pieces of information required.
“The companies could get multiple requests so we’re saying 'let’s go back and ask for the information in a consolidated way so the insurers aren’t impacted by multiple different requests', and we can help them collate that data or they can use our template and we can run our eyes over it.”
Read said the FMA had been clear in what it required from advisers. “They’re looking to say ‘you’ve got that lapse and new business rates, there’s the potential for churn', and asking advisers to show what happened there so they can look in behind those rates.
"If from that information they saw a pattern of replacement the next step would be to look to do an interview or look at client files.”
Read said it was unsettling for the advisers contacted but those who could be confident they acted in their client’s best interests at every stage would have nothing to worry about.
He said IDS had always told RFAs that they should work in a way that would meet the AFAs’ code of conduct, which requires advisers to put clients first. “Then if something like this happens, it’s easy to show you’ve met the requirements.”
An FMA spokesman said it would be inappropriate to comment further at this stage of the investigation.
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