The Financial Services Council (FSC) wants the reinvigorated debate on churning to focus on industry sustainability rather than advisers’ practices.

It abandoned its proposed churning policy earlier this year after opposition from insurers and the financial advice industry.

But FSC CEO John Brogden says the problem will not go away now the Federal Government and Australian Securities and Investments Commission are calling for self-regulation on churning.

“It is a live issue,” he told insuranceNEWS.com.au.

The FSC life insurance board has decided to review the clawback framework in the sustainability policy that had been abandoned.

“We will also be looking at… how the policy will benefit consumers,” Mr Brogden said.

The review aims to “steer the debate away from churn and look at how a policy could deliver benefits to consumers by making the industry more sustainable”.

He says the life industry has been built on the expectation clients will hold policies for at least seven years.

“We are now seeing people lapsing policies after three or four years. The industry has been dominated in recent times by increasing lapse and claim rates.

“They are seeing fewer clients costing insurers more.”

Mr Brogden says the industry in its current form is not sustainable, although it has an obligation to increase the number of people covered to benefit everyone.

“We are seeing more people covered through group policies but there is still a problem of massive underinsurance,” he told insuranceNEWS.com.au. “Our objective is to get people insured.

“The more that is achieved, the less pressure is on the public purse.”