Life insurance approved product lists (APL) should be banned by the regulator, according to a new paper commissioned by ClearView.

The paper – written by industry whistleblower Jeff Morris – says APLs make it impossible for financial advisers to properly manage conflicts of interest.

“Institutionally aligned Australian Financial Services Licensees knew all the right things to say and how to look remorseful,” Mr Morris said. “But scratch the surface and there have been no real changes to the culture and practices inside these organisations.

“Heavily restricted life insurance APLs are still the norm and not even heat from the recent financial services royal commission has been enough to compel them to apply higher standards and put their clients first.”

Risk Store Founder Sue Laing, who contributed to the paper, says the lack of innovation, competition and efficiency in life insurance is a result of limited APLs.

“Given the small number of non-associated APRA-regulated life insurers, choice is already limited enough,” she said.

CBA-owned Financial Wisdom and Commonwealth Financial Planning have only three or more life insurers on its APL, and is looking to expand, the paper says.

IOOF refused to participate, while MLC says it has “not onerous” processes allowing advisers to choose non-APL products. Yet Ms Laing argues advisers have to follow a “deliberately prohibitive” process to recommend a non-APL product.

The paper also questions how the limited APLs fit in with the best interest requirement. This encourages advisers to automatically bypass the reasonable investigation into different financial products and defer to the dealer group’s recommendations, it says.

“It’s difficult to see how advisers can provide compliant advice under the Future of Financial Advice obligations if they are routinely recommending sub-optimal life insurance solutions,” it says.

ClearView MD Simon Swanson also says the Financial Services Council’s (FSC) APL standard has failed to achieve industry change. Writing in the paper, he says the FSC doesn’t know if any of its members – around 30 licensees – have adopted the standard.

“The unwillingness of the FSC and some dealer groups to co-operate questions the adequacy of the industry’s response to key royal commission criticisms around the industry’s management of conflicts,” he said.

The widespread use of limited APLs among dealer groups forced ClearView to establish its own dealer groups – Matrix and ClearView Financial Advice – to gain access to financial advisers. However, it has an open product list for its planners.

“It’s no secret that our push for open APLs isn’t purely altruistic,” Mr Swanson says. “As a relatively new player, we want to do business with as many independent financial advisers as possible.

“Every participant has a responsibility to encourage innovation and competition to ensure continuous improvement. Restricted APLs stifle progress and evolution.”